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BlackBerry (NASDAQ:BBRY) has been the talk of town for quite awhile now, with many pundits declaring it dead or dying. Maybe it is, but maybe not.

For a dead or dying company it shows signs of life. So far this year it introduced its new Z10, Q10, Q5 and Z30 devices, and, last quarter, it sold 6.8 million phones. It still has many fans as anyone who reads the comments on SA knows. The devices are solid, well designed, powerful and functional. BlackBerry still is the gold standard for security.


(Click to enlarge)


(Click to enlarge)

This weekend it will release its BBM messaging service on both Android and iOS platforms. I expect it will be very popular. It certainly is popular in our household. By next week, we will start to get information on how well it is received. I use it daily and would be lost without it.

Many observers compare BlackBerry to Apple (NASDAQ:AAPL) or to Android. Why? There are a lot of other smartphone suppliers in the world who are not the subject of the negative press heaped on BlackBerry. Is there a reason why BlackBerry is so controversial? The company is not a fraud, is well managed, has a blue chip board of directors and sells products people need. Is there some reason every Wall Street commentator has to take a strip out of BlackBerry every time they get air time?

BlackBerry should be compared to suppliers its own size. How does it stack up against HTC (OTC:HTCCY), ZTE (OTCPK:ZTCOF), Yulong, Xiaomi, LG (NYSE:LG), Lenovo (OTCPK:LNVGF), and a host of other relatively small suppliers? I think it compares pretty well but have not seen such a comparison.

It has become very American to bad mouth BlackBerry and it is not a feature of the American ethic that I admire. Sure, there are a lot of Americans with sizeable short positions in BlackBerry who stand to profit if the firm fails and more power to them. But the degree to which American TV and press journalists think it worthwhile to proclaim the failure of a very fine firm on a daily basis is unfortunate. Maybe it sells newspapers or more advertisements. I don't know.

One SA member makes it a point to post negative comments on BlackBerry daily, posting over 2,000 such comments so far by my count. He rarely comments on anything else. He (if it is a he) typifies the plague of negativism that BlackBerry is subjected to.

In any event, a slimmed down BlackBerry right-sized for its market is a company worth owning. The recent report that BlackBerry was on the verge of a further cut in staffing is not alarming - it is evidence the company is on the track to sustained profits through a streamlining of its operations.

What would a slimmed down BlackBerry look like? I have put together a simple model, and it looks pretty good using fiscal 2014 as a reference point.

Blackberry Fiscal 2014 Sales and Profit Forecast

Units Sold (millions)

ASP - $

Revenue $ 000,000

Product

Low

Medium

High

Low

Med

High

Z10

4

5

6

$450.00

$1,800

$ 2,250

$ 2,700

Q10

5

6

7

$450.00

$2,250

$ 2,700

$ 3,150

Q5

5

6

7

$300.00

$2,250

$ 1,800

$ 2,100

Z30

2

3

4

$600.00

$ 900

$ 1,800

$ 2,400

BB7

$ -

$ -

$ -

Playbook

$ -

$ -

$ -

Software & Services

$2,500

$ 3,000

$ 3,500

TOTAL REVENUE

$9,700

$11,550

$13,850

Margin - %

38%

42%

45%

Margin - $

$3,638

$ 4,851

$ 6,233

R&D

$1,000

$ 1,250

$ 1,500

G&A

$2,200

$ 2,500

$ 2,800

EBIT

$ 438

$ 1,101

$ 1,933

Tax

$ 127

$ 319

$ 560

NET INCOME

$ 311

$ 782

$ 1,372

E.P.S.

$ 0.59

$ 1.49

$ 2.62

BlackBerry currently spends $3.2 billion annually on General and Administrative expense. I have cut that back to $2.2 to $2.8 billion. I have pared the R&D budget to between $1.0 and $1.5 billion. And, I have assumed no BB7 or Playbook sales (since any sales would be at break even at best, in my view).

I have assumed annual device sales of between 16 and 24 million. The result is net income between $300 million and $1.4 billion. With a profitable base and a focus on those markets and customers where BlackBerry is valued, these results should be possible.

All the talk of a buyout is clouding the underlying picture. I use a BlackBerry. Many people I know use one. Many governments, police forces, fire departments and security agencies use BlackBerry's. A lot of corporations use BlackBerry's. Millions of people use BlackBerry devices. BlackBerry devices are unique and serve important functions better than any competing device. In the right market niche, its functions are unparalleled. It is not time to declare the company dead. Far from it.

I am long BlackBerry calls.

Source: BlackBerry Is Far From Dead. Right Sized, It Will Have A Profitable Future