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Summary

  • The design of Passport will attract the customer base with a preference for a wider and high-resolution screens for Phablets.
  • Amazon deal will solve the issue of apps to some extent and the asset disposal will allow the company to manage costs and enhance its cash position.
  • QNX and services will play a vital role in the turnaround of the company as services segment accounts for a major portion of its revenues.

BlackBerry (NASDAQ:BBRY) had been range bound since the start of April - the stock was trading between $7-8 with minimal movements. However, during the last week, the stock recorded its first major move of the year, and it is now up over 39% during the last ten days. We have been optimistic about the prospects of the company due to the clear vision of the management and clearly defined goals, which has given a direction to the company. We have been preaching patience to the BlackBerry investors in our previous articles, and the patient investors have now been rewarded with a massive gain over the last few days. However, the future direction and the prospects of the company mean that this major upward break in the stock price will not be the last.

A Few words About the Design of Passport

John Chen has recently disclosed a newly designed smartphone which, surprisingly, has a square shape. The new smartphone is called Passport. It has a 4.5 inch display with the classic QWERTY keypad. However, the company has not disclosed any information about its hardware and software specifications yet. It is scheduled to launch in September 2014 in an event in London.

Most of the Smartphone users and the market participants were surprised by the design - the handset is huge. It has a 4.5 inch display but the aspect ratio is 1:1, which makes its screen size massive. Also, the resolution is extremely impressive at 1440*1440. It is a phablet and with the growing acceptance of the phablets; it can be said that the surprise has been a positive one with a large screen size. It will definitely attract the customer base with a preference for wider screens. We have seen that Samsung (OTC:SSNLF) has been experimenting with the screen size and the result has been mostly positive to its Galaxy note and Galaxy S5. The launch of the Passport and Classic (also pictured above), in the second half of the year will likely result in better than expected results for the company. Z3 has been launched in India as a low priced Smartphone and it will be competing with Samsung and Nokia's (NYSE:NOK) low-end Smartphones in the country. India is a massive market for low-end smartphones, but the competition is extremely strong and the market is saturated. However, the brand value and the loyal BlackBerry customer base should result in good sales for the company.

Services, Messenger and QNX

Services segment is enormously important for the company. BlackBerry has been showing strong development in its services part of the business and more than half of its revenues come from this segment. Analysts at Evercore anticipate that BlackBerry Messenger could become a $230 million business for the company as its lost subscribers return from using other services. So, the prospects from the services and the messenger are also good.

In our previous articles, we have talked about the potential and the future application of QNX. In the most recent meeting, John Chen has reiterated the importance of QNX for BlackBerry going forward, and how the company is expecting to play a big role in its "internet of things" offering.

Amazon Deal

BlackBerry might have solved its app problem to some extent as it signed a deal with Amazon (NASDAQ:AMZN). With this partnership, BlackBerry users will have access to 240,000 apps in addition to the previously offered 130,000 apps. Moreover, there will be some uniquely featured apps also available which were not available to BlackBerry users before. Although, as compared to Google (NASDAQ:GOOG) Android and Apple (NASDAQ:AAPL) app stores, the number is still low, but it is still a big development for BlackBerry and will definitely make a difference for the company. BlackBerry previously tried to address the issue of lack of apps by adding support to android apps in its smartphones. However, the installation process came as a stumbling block.

Asset Disposal

BlackBerry is selling its Canadian real estate to Spear Street Capital for approximately $278 million. This shows that the company is on track with its restructuring plan. This move will not only bring down the company's maintenance costs but also free up a considerable amount of cash which is crucial at this point in time. We have seen in the past that the companies going through restructuring focus on decreasing operating expenses. Selling the real estate assets and leasing them back has been a popular choice for the companies to manage costs. We have seen Zynga (NASDAQ:ZNGA) do the same in the past to decrease its expenses. This deal will help the company decrease its operating expenses and inject some cash in the balance sheet.

Conclusion

BlackBerry is not out of the woods as John Chen himself said that we need to have 2-3 more quarters of growth before we start celebrating. However, the most recent earnings announcement has shown that the potential for growth exists. We have been optimistic about the company due to the extremely attractive portfolio of services and the superior software capability. We maintain that the company is on track to grow over the next few quarters, and we believe the rise in the stock price will continue as the second half of the year will show solid growth due to the launch of two products.

Additional Disclosure: This article is for educational purposes only and it should not be taken as an investment recommendation. Investing in stock markets involves a number of risks and readers/investors are encouraged to do their own due diligence and familiarize themselves with the risks involved.

Source: BlackBerry Will Continue Its Rise