This Billionaire Is Missing The BlackBerry Boat

May.19.14 | About: BlackBerry Ltd. (BBRY)

Summary

Much ado about nothing: Dan Loeb discloses he's no longer invested in BlackBerry.

Much more ado worthy: A BlackBerry insider reiterates its guidance to be cash flow positive by February '15 - that's less than a year away.

With a rock solid balance sheet and a stock priced near its book value, how much longer can BlackBerry trade at this dirt cheap valuation?

I like John Chen and I support the new BlackBerry (NASDAQ:BBRY). Simply put, I think the company is better suited now to make a move to the upside than it has been in the past couple of years.

I think Chen's prudent, common sense laden approach to running the business - including surrounding himself with accomplished executives, making all necessary cuts, separating emotion from his job and securing the balance sheet - has put BlackBerry into a position to be an excellent turnaround story.

Hell, if J.C. Penney (NYSE:JCP) can be considered a turnaround story with its nominal same store comps and downright frightening balance sheet, what is the market going to think of BlackBerry when it becomes cash flow positive - or even cash flow neutral?

Thus, if I had the money, I would have gobbled up Dan Loeb's BlackBerry shares if he was selling them at these levels. This reminds me of a time that there was a big "to do" about a billionaire selling out of Apple (NASDAQ:AAPL) due to him thinking that Steve Jobs was a jerk. I quickly penned an article claiming I'd gladly buy this billionaire's shares, and Apple stock quickly made a fool of him. The stock he sold was valued around $489.83 on the open of the day I wrote my article. That's a 22% gain missed that I easily would have been happy to pocket.

I contend that BlackBerry stock could do the same to Mr. Loeb in the coming quarters. Mr. Loeb's short foray into BlackBerry, which lasted just several months, didn't seem like a prudent strategy. Why would you buy BlackBerry and hold for just a couple of months?

Benzinga reported:

BlackBerry shares have suffered a rough three months, falling from $10.50 to $7.38. Dan Loeb showed a ten million share position last quarter, which he completely liquidated in the past three months. Hopefully for Loeb he sold it at the beginning of the quarter.

As I stated in a past article, it seems that Mr. Loeb - amongst the investing community - thought that Mr. Chen was going to be able to turn this company around overnight. When you're stripping and then rebuilding a massive company around its assets, it often is going to take more than a couple of quarters to accomplish. No doubt, BlackBerry was a massive, bloated mess when Chen was handed the company. I'd argue that with the progress shown to date, Mr. Chen is making damn good time.

Plus, there's just something I like about Mr. Chen. He's the right combination of cheekiness, common sense, book smarts, and confidence - a great prescription to be a genial public company CEO. I dare you to find a photo of this guy where he doesn't have a "relax, I've got this" style smile on his face.

Not that photos of him hold any material effect on how the business will perform. Regardless, I'd love to have him at the helm than someone like athenahealth's (NASDAQ:ATHN) Jonathan Bush. But that's a different story for a different article.

I'm not going to spend a lot of time going into the monetization prospects of BlackBerry's remaining portfolio of assets: BBM, QNX, Server, and emerging market handset sales to name a few. There's a ton of articles that deal with specifically that. What I will say, however, is that BlackBerry's Z3 Jakarta launch results are going to be eagerly awaited.

Which brings me to Eric Lai's statement made in his blog yesterday. Interestingly enough, this news came just days after BlackBerry reiterated their guidance for cash flow positive by February 2015 - not too far off. Seeking Alpha reported:

  • In a post defending his company against critics, BlackBerry ( +0.5%) blogger Eric Lai reiterates the company aims to be cash-flow positive by the end of FY15 (ends Feb. '15).
  • John Chen has already made such a prediction, and has also said BlackBerry aims to be profitable in FY16. Nonetheless, shares caught a bid on today's remarks, and are closing higher in spite of an equity selloff.
  • The comments come on a week that has seen BlackBerry launch its $200 Z3 smartphone in Indonesia, and agree to allow BB10 devices to be managed by 3rd-party MDM software platforms.

This news comes just days after the company's Z3 smartphone launch in Indonesia. I wonder if Mr. Lai has an inside track on how the first weeks sales figures turned out?

Not that it matters to Loeb, but I'd like to go on record and state that I think he's missing the boat on this one. Much like those who contributed to the sell off after BlackBerry's last earnings, people are too focused on the short term here. Transitions are never immediate, nor are they ever timely - especially when they're done correctly and in a calculated fashion.

I continue to believe the reward is coming for the patient in BlackBerry soon. As such, I plan on adding BlackBerry back into my portfolio sometimes relatively soon.

Best of luck to all investors.

Disclosure: I am long AAPL. 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.

Additional disclosure: I am long AAPL, short ATHN, and plan to initiate a BlackBerry long position sometime relatively soon. My opinions and trades all subject to change without notice, at any point.