I am often amazed at the media's ability to put any spin they want on a company in turmoil. After watching the market the past few years its easy to see it happen time and time again. Last years target stocks included some mega caps including Procter & Gamble (NYSE:PG), as well as Cisco (NASDAQ:CSCO) and Best Buy (NYSE:BBY). This years media targets are JC Penney (NYSE:JCP) and BlackBerry (NASDAQ:BBRY). I usually take the other side and go long but I feel this time is different.
Last year's media targets were companies that for the most part, really weren't in any major financial problems. With the exception of Best Buy, Procter & Gamble and Cisco were still thriving. My problem with this year's companies, mainly, is that they refuse to change and adapt to the current marketplace. While BlackBerry quietly announced the Z30 this month, it refused to update the specs so that it can compete with today's offerings in the high-end phone market.
While nobody knows the actual pricing of the phone yet, if its subsidized price is anywhere near $300, consumers with no brand loyalty aren't going to think twice about getting an iPhone or a Samsung phone. A little while ago I wrote about how BlackBerry went on a path of self destruction but this shows it hasn''t done anything to change since then.
I have decided not to purchase the stock because it isn't taking what may be its last attempt at gaining marketshare seriously. Prior to the write-off I had valued the company on a sum of the parts basis to be $11. Now that the business has further deteriorated, I don't see another bidder coming in and think the current offer is much closer to the company's true value.
Those long the stock think BlackBerry's patents are worth significantly more than they are being valued at. I find this to be unfounded. Great patents could be priced at very different price points. AOL's (NYSE:AOL) patents went for $1.1 billion but more recently Broadcom (BRCM) bought a patent portfolio from Renesas for a $164 million. Both patent portfolios had great value. In addition I can't consider the cash on hand to be worth its weight when it dwindles every quarter. The large write down making the headlines are just for the Z10. I believe the bigger write down will come down the road as I believe the Q5 was the worst product launch BlackBerry had this year.
Any company that loses money on a non seasonal basis is a company in trouble, but when you don't try to pass or even imitate the leader, then you have a company nearing its end. BlackBerry refuses to give any signs of change and maintains it status as the company that "delays" with it current delay of BBM for Android and IOS. Nobody likes to take losses but I believe anyone that purchased the stock above $11 may not get out with a profit.
Disclosure: I am long BRCM. 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.