BlackBerry Outlook Becoming Bleak

| About: BlackBerry Ltd. (BBRY)

"It's over" is probably not the best headline to use for a column intended to offer possible investors a closer look at a particular stock's potential.

All companies certainly go through rough patches, whether it's tiny shoestring solo operations or multi-national industries. Plus, the repeated message of the modern American stock market is not to get too jittery about a little turmoil, since sometimes a business emerges a little stronger, which is rewarding for the investor who has hung on tight over the long haul.

But a Sept. 18 Forbes article discussing pending large-scale lay-offs at BlackBerry (NASDAQ:BBRY) really lays it on the line, and the news seems awfully final. (Forbes)

The company plans to cut up to 40 percent of its workforce by year's end, which will likely affect thousands of employees worldwide. This move seems more than a "slight but necessary correction" or "unfortunate but required trimming of expenses" or similar neutral language that other companies have used to convince us that things aren't so bad. This one has "things are so bad" written all over it.

While the announcement likely took employees by surprise, analysts didn't seem all that shocked since the company has been posting weak sales for the last year, and the regular releasing of new phones onto an already-saturated market haven't done much to boost the bottom line. Even more telling, the same day of the layoff announcement, the company released the Z30 phone line, which really was unlikely to do much to counter the bad news.

Interestingly, while Wednesday's announcement caused a brief mid-day dip in price and spike in trading, the stock closed only 16 cents, or 1.47 percent, lower than Tuesday, at $10.40 per share. The stock has been across the board over the last year, seeing a high of $18.32 per share in January and a low of $6.22 last November.

Some may see this as a good "buy low" opportunity and consider snatching up some deals. But it's a smarter bet to conclude that the mobile device marketplace may be too saturated for a weaker, older company like BlackBerry, no matter how well it used to perform. It may be a time for it to finally step away and make room for other biggies like Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) to fight over the marketplace spoils.

A separate Forbes columnist this week offered similar speculation that BlackBerry should consider selling itself off in pieces, especially if second quarter results turn out to be as dismal as everyone expects. This view is based on poor earnings for first quarter and lackluster sales for its products in 2013.

For instance, it sold 6.8 million smartphones in first quarter, while predicting sales of 7.5 million. Of these, only 2.8 million, or less than half, were the newer Z10 and Q10 lines. The Q5, which came out this summer, was supposed to be an affordable alternative to the iPhone or the newer Androids, but ended up having a $400 price tag. Results will officially be released Sept. 27. (Yahoo Finance)

But is it all doom and gloom for BlackBerry? Not entirely.

It did make the NASDAQ Active Stock Watch list earlier this week, receiving praise for its 67.85 percent turn-around from its low of $6 last fall.

It also was in good company, since Facebook (NASDAQ:FB) also made this list. One could make an argument that Facebook was also a strong company but initially undervalued and underappreciated once it went public. But it eventually became much more steady and solid as a public company.

Then there was the new Z30 phone, which includes some pretty cool new features, including a brighter-than-ever screen and more camera memory and higher megapixels.

Plus, another big bright spot in a roller coaster of a day was when the company proudly announced the release of the BlackBerry Messenger app for Droid and iOS systems. Company officials have been making the promise of this free chat service for most of 2013, and it finally was added to the iTunes and Google Play stores. (eFinanceHub)

In any other day, in any other company, all of these positives may have been exceptional.

But with BlackBerry, which may have seen its glory days when it was the only mobile player in town, most of this good news came too little, too late.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:

Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500. Become a contributor »
Tagged: , , , Diversified Communication Services, Canada
Problem with this article? Please tell us. Disagree with this article? .