BlackBerry: Notes From The Securities Summit

| About: BlackBerry Ltd. (BBRY)

Summary

BBRY held its securities summit in NYC reiterating its value proposition.

The company is expected to make an announcement on the handset business in the coming weeks.

I reiterate my bearish view but point out that potential sale or restructuring of the handset business could be a catalyst for the stock.

BlackBerry (NASDAQ:BBRY) held its Securities Summit last week in New York and overall I am not changing my view on the company in that its hardware business continues to be a drag on the company's overall profitability, and service network revenue continues to be in a structural decline. The only positive on this company is its software and IP, which could still hold some value, and the potential growth for BBM in some regions of the world. Management communicated that they will make an announcement regarding the handset business in the coming weeks, and if the company decides to pull out of the handset business, then I believe it will be a catalyst to rally the stock. By becoming a software pure-play, BBRY opens the possibility that it could potentially be sold to another software company from the US or Canada. A sale of the company is the best possible outcome for BBRY and if I were John Chen that should be my singular focus.

Investors can compare Chen to that of Jay Forbes, the CEO of current Manitoba Telecom Service, a Manitoba incumbent telecom provider. Forbes was brought in to turn around MTS or find a strategic alternative. At the end, Forbes masterfully sold the fledging Allstream enterprise business and now the core cable is being sold to BCE (NYSE:BCE). Chen should take note in that BBRY is becoming less competitive in all of these operating segments that a sale of the handset business (plus IP) and a sale of the software business to a North America-based peer is a likely outcome. That said, I remain bearish on BBRY's outlook but do acknowledge that potential sale of the company's handset or software business will continue to support the stock price in the medium term.

The meeting overall was positive where BBRY management highlighted the value BBRY can deliver to enterprises, governments and individuals around the world given the risks associated with cyber security. While I have no issue with what the company presented, my concern lies in the irrelevant handset business, a declining service business and the company's eroding profitability. Unless the handset business issue/existence is addressed, I am skeptical at the prospect of the company due to the already weak investor sentiment.

The management did note that we should be expecting a major announcement on the handset business in the coming weeks. The tone sounded that the company may be looking for ways to keep the handset business. Recall that Chen previously said that he either would fix or nix the business. I believe that a nix could be in play given that current BBRY's handset volume is irrelevant in the global smartphone market and that it is better off focusing on its software and other components of its ecosystem (i.e. messenger) (see - BlackBerry: Will BBM Be The Future Of This Company?). Regardless of what the outcome, the company should focus on addressing the profitability of the handset business to improve its profitability.

In short, I remain bearish on BBRY. Any speculation regarding a sale of the handset or the whole company will continue to support the stock price in the medium-term so I would recommend short-sellers to cover their shorts.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.