BlackBerry (NASDAQ:BBRY) came out with the greatest piece of news after the market closed on December 12, 2013. The company is extending the purchase option deadline for additional convertible debentures. The $1 billion of the debentures were already purchased by a group of investors including Fairfax Financial Holdings Limited, the largest shareholder of BlackBerry common stock. The extension will enable BlackBerry to provide financial results to prospective investors after the December 20, 2013 release date. A quiet period has been in force since the initial closing and the extension will be until January 13, 2014.
Read between the lines
I see this as an extremely bullish signal for BlackBerry. My reasoning is in the thought that investors will only commit an additional $250 million if the Q3 financial results and forward guidance from the company are positive. There would be no reason to extend the deadline if the financial results were going to be a disaster. Sophisticated investors would be very skeptical if the results were anything but exceptional and the company included a solid business strategy.
Expect some exciting news
I expect the Q3 results to have significant forward guidance concerning where BlackBerry will be aiming in the next few quarters. In a previous article for Seeking Alpha I outlined quotes from John Chen that give some insight into his past strategies with Sybase. One of the main strategies Chen concentrated on was making sure the things Sybase committed to were bringing in revenues. The dotcom bubble was disastrous for a multitude of tech companies but Sybase was able to sidestep the bubble with solid revenue growth instead of fluffy delusions that a website was better than a good P/E ratio.
BlackBerry has many ways to increase their revenues and drop parts that lose money. The monetization of BBM is practically a given with the millions of current customers in addition to the tens of millions of downloads from Android and Apple smartphone owners. BBM could be a major part of BlackBerry's future revenue and worth billions with the proper content delivery strategy.
I expect a solid business plan, a positive surprise on Q3 results, and optimistic forward guidance in the December 20 conference call. On the negative side, I'm sure the business plan will take a few quarters to see results. The extension on the debentures is probably due to additional money needed to ensure enough funds for the turnaround. If the upcoming financial results prompted thoughts of a BlackBerry demise, there would be no reason to extend the deadline.
Disclosure: I am long BBRY. 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.