BBRY Stock Is a Buy … if Management Follows Tim Cook’s Advice

Blackberry (BBRY) has tried to make a name for itself by appealing to enterprise customers, but on a consistent basis, the company and BBRY stock falls flat and continues to disappoint.

MWC 2015, MWC Trend blackberry
Source: BlackBerry

The company’s fiscal second quarter was no different, as BBRY’s hardware sales and EPS both fell short of expectations. Apple’s (AAPL) CEO Tim Cook has a good explanation why, and it’s a reason that Blackberry’s CEO had better consider for the sake of BBRY stock.

Tim Cook Speaks … BBRY Would Be Wise to Listen

Tim Cook doesn’t do a lot of interviews, but he did one at the BoxWorks Convention to promote the company’s newest iPhone release. But Cook spent most of his time wrapped up in conversations about enterprise customers, where he unveiled a $25 billion business for Apple’s enterprise operations.

In that conversation, two of Tim Cook’s statements really stood out. These are quotes by Tim Cook that BBRY and its investors should ponder.

People don’t really buy enterprise smartphones any more than they buy enterprise cars. They buy cars and phones.

What Tim Cook is trying to say is that separating enterprise from consumer is a bad idea for hardware makers, as the lines are growing more blurred by the day. Yet Blackberry continues to distinguish its products as “enterprise”.

When John Chen took over at Blackberry, his goal was to build on the success of Blackberry with businesses. Chen claimed that 80% of Blackberry’s 50 million subscribers were enterprise users. Blackberry then tried to piggyback this niche market with other services, like Blackberry Messenger, a WhatsApp-like service aimed at business users.

However, what we’ve witnessed in recent quarters is that Blackberry’s hardware sales continuously underperform expectations. Perhaps Cook’s statement explains why, as consumers are using their smartphones and tablets for both work and personal use.

Blackberry doesn’t seem to get this concept, but it should, and it needs to.

Cook served up some other words of wisdom that Blackberry should take note of, too.

Life is short, we’re going to die soon, and you got to have as many friends as you can have … If by working with someone, you can serve someone else better you should do it.”

Notably, Apple partnered with Cisco (CSCO) to create an internet “fast lane” for iOS business users, and also with IBM to create better business applications among other things. Even for the world’s largest, most dominant consumer electronics company, partnerships are imperative, and Blackberry must take note.

Change Is Good for BBRY Stock

Thankfully for BBRY stock investors, BlackBerry has finally embraced partnerships and the willingness to look beyond a company’s own hardware and software. Up until this point, BBRY has tried to reinvent its hardware while keeping the same BBRY-owned operating system, which includes far fewer apps and is largely considered inferior to iOS and Android.

Last year, however, BlackBerry partnered with Amazon (AMZN) to gain access to its Android applications, giving BBRY access to more than 240,000 apps. By embracing these applications and the Android operating system, Blackberry would instantly gain access to Android’s 1.4 billion users. This would be a gigantic upgrade from BBRY’s current addressable market of 50 million subscribers, and would open the company to new opportunities of consumers who may like BBRY’s hardware, but do not want its operating system.

During BBRY’s latest quarter, it had just $200 million in hardware revenue — about $65 million shy of analyst expectations. Given the fact that Android and iOS are a duopoly throughout the world, such performance is probably here to stay unless Blackberry starts trying to compete with the likes of Samsung and LG by incorporating the Android operating system.

Thankfully, BBRY will be launching an Android phone later this year, which should produce a boost to sales and BBRY stock price. The big question is whether management is smart enough to follow Tim Cook’s advice and keep going down this road, essentially retiring its own operating system.

With the BBRY stock price around $6, with a market capitalization of $3.2 billion, BBRY trades at nearly one times cash, which means the market is valuing its business and patents at zero. BlackBerry continues to lose customers and is yet to show any real signs of long-term growth.

By embracing Android, BlackBerry could potentially quiet the critics while improving its growth prospects, and at such a beaten down price, BBRY stock would then be worth owning, but only if the company follows Tim Cook’s advice.

As of this writing, Brian Nichols was long CSCO and AAPL.

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