Seeking Alpha

Bill Maurer's  Instablog

Bill Maurer
  • on Technology
  • on Consumer Goods
  • on Long Ideas
Send Message
I am a market enthusiast and part-time trader. I started writing for Seeking Alpha in 2011, and it has been a tremendous opportunity and learning experience. I have been interested in the markets since elementary school, and hope to pursue a career in the investment management industry. I have... More
View Bill Maurer's Instablogs on:
  • Apple Is Crushing Android Where It Matters Most

    When it comes to the smartphone industry, there is a large debate over what it truly means to be a winner. Some will argue that whoever has the most market share is the true winner, while others may look at who is growing the fastest. In a recent article, Michael Blair discussed the tremendous growth of the Android platform, which currently dominates the smartphone operating space. As a result, many may believe that Google (NASDAQ:GOOG) (NASDAQ:GOOGL) is the one name to own.

    However, Android may not be as successful where I believe it matters most. Today, I'll discuss how Apple's (NASDAQ:AAPL) iOS is crushing Android in the most important category, operating profit. In Mr. Blair's article, he discussed the tremendous growth that the Android platform has seen in recent years. The following chart was taken from Mr. Blair's article, showing how Android dominates the smartphone operating system installed base.

    However, when we look at a different metric, Apple's iOS blows away Android, and the picture is even more dramatic. In a recent release, Strategy Analytics reported that Apple took a record 88.7% of smartphone operating profits in Q4 2014. In fact, Apple showed quite a large jump from the prior year period, as seen in the chart below detailing dollars and percentages.

    (click to enlarge)

    In Q4 2014, Apple's fiscal first quarter, the company announced its most impressive quarter ever, selling nearly 75 million iPhones. Apple generated about $687 in revenues from each unit sold, a rise of about $50 from the prior year period. As a result, Apple had more than $51 billion in revenue from the phone. The high margin device helped boost gross margins, giving Apple more than $18 billion in net income from the quarter. The most telling number above may not even be the sharp rise in operating profits for Apple, but in fact the large drop that Android showed. Strategy Analytics provided the following quote in regards to the current situation:

    Apple iOS continues to tighten its grip on the smartphone industry. Apple's strategy of premium products and lean logistics is proving hugely profitable. Android's weak profitability for its hardware partners will worry Google. If major smartphone manufacturers, like Samsung or Huawei, cannot make decent profits from the Android ecosystem, they may be tempted in the future to look at alternative platforms such as Microsoft, Tizen or Firefox.

    In the end, the Android camp might point to its tremendous growth and huge market share, but Apple is the name that's winning the most important battle. When it comes to operating profits, iOS generated nearly $19 billion during Q4, representing nearly 89% of global smartphone operating profit share in the quarter. Strategy Analytics believes that major smartphone manufacturers may worry about Android's profitability going forward, which could tempt these names to look at alternative platforms. I'm already on the record stating that 2015 is an important year for Google, as the company struggles to grow its bottom line. As Strategy Analytics states, Apple continues to tighten its grip on the smartphone industry, and the technology giant is winning where I believe it matters most.

    Mar 25 10:48 PM | Link | 1 Comment
  • BlackBerry: The Floor Is Yours

    Later this week, we'll get the latest quarterly report from BlackBerry (NASDAQ:BBRY) when the company announces its fiscal Q4 results on Friday. Investors are looking to see if fiscal Q3 marked a revenue bottom. Newly launched phones are key to the company's top line number in the short term, but also driving software and service revenues in the long term. BlackBerry shares are towards the lower end of their recent range currently, as investors eagerly wait for this crucial report. Today, I'll take a look at where things stand for BlackBerry as earnings approach.

    Will Q3 mark a revenue bottom?

    When BlackBerry reported its latest results back in December, the company announced a large revenue miss. Management partially blamed some phone sales being pushed into Q4, but the top line number badly missed estimates. As a result, analyst estimates came down tremendously for the soon to be reported quarter. You can see in the table below the changes in analyst estimates over time.

    The current average estimate still represents a decline of about 18.5% over the year ago period. BlackBerry did surprise with an adjusted penny per share profit last quarter. The company has done a great job in recent quarters of beating on the bottom line, so investors are probably expecting a decent adjusted EPS figure. In terms of revenues, the key number will be $793 million, which we saw in Q3. Those that are bullish on this name in the long run want Q3 to mark a revenue bottom, and that's a key to this week's report. In the chart below, you can see some recent quarterly revenue numbers, with the two quarters in green being current estimates.

    Analysts expect a small sequential rise in Q4, with that momentum continuing a bit into fiscal Q1 of 2016. The key focus in the short term is how many of the new Passport and Classic phones were sold, and the average sale price overall. These new phones are expected to raise the company's ASP number a bit, helped by a smaller percentage of sales coming from older and cheaper legacy phones. Getting these key hardware revenues are a long term key for the company's software and service businesses, which BlackBerry is trying to grow substantially in upcoming years. If BlackBerry can show some decent hardware sales momentum in the short term, it will help set things up a bit going forward.

    One analyst recently threw a bit of cold water on the company's turnaround hopes. Wells Fargo believes that BlackBerry shares are fully valued going into earnings, based on the notion that quarterly revenues and performance are likely to "disappoint meaningfully". While street estimates call for quarterly revenues to rise slightly sequentially, Wells Fargo thinks we could see a nine percent decline. The firm thinks that Classic sales will be pushed forward into Q1. The analyst believes that capital expenditure cuts could lead to an EPS beat, but that this would not be material to the long term story. Wells Fargo sees the chance of a BlackBerry buyout being limited in the short term, and has a $9.50 to $10.50 fair value range for the stock.

    Investors are also looking forward to see if BlackBerry can show positive cash flow for the quarter. The company finished fiscal Q3 with about $3.1 billion in cash, against $1.66 billion of debt on the balance sheet. The company has slowed down its cash burn tremendously in recent quarters, and the hope is that cash flow will become positive again going forward. A solid balance sheet and decent cash balance are key for the company, as it gives the company flexibility to focus on growth efforts going forward. The Secusmart acquisition, which I'll focus on in the next section, is one example where BlackBerry was able to use its financial resources. Later this year, that acquisition may help the company with a new revenue source.

    Tablet effort, part 2:

    Recently, the company announced a new ultra-secure tablet which could go on sale this summer. For some, this news might sound odd given the company's struggles in the tablet market. However, BlackBerry should be applauded for its second foray into this space, because this new offering is a much better idea. The BlackBerry SecuTablet was launched in partnership with Samsung (OTC:SSNLF) and IBM (NYSE:IBM), and is based on Samsung's Galaxy Tab S 10.5 Android tablet. The device contains encryption and anti-eavesdropping technology developed by the German Secusmart unit, which BlackBerry acquired last year. Sales could start this summer, with the initial price being about $2,380.

    Those critical of the company will look at BlackBerry's first foray into the tablet space, the PlayBook. This was a spectacular failure for the company, and the unit has been discontinued. BlackBerry's tablet effort was so poor that former CEO Thorsten Heins stated back in 2013 that tablets would be irrelevant in five years. Perhaps that was a bit of sour grapes, given the company could not make any strides in this space. This second tablet effort for BlackBerry is much different, however. The SecuTablet is not expected to compete with a $99 children's tablet or a $500 iPad. This tablet is aimed at those with high-end security needs, enterprise and government clients in particular.

    Final thoughts:

    Recently, BlackBerry shares have been under a bit of pressure, with the latest leg down starting after a downgrade from Goldman Sachs. Shares have spent a large portion of the last six months between $9 and $11, as you will see in the chart below. With the stock declining below $10 again, the 50-day moving average line has started to head lower. If BlackBerry's report fails to satisfy, the 50-day line will definitely drop below the 200-day moving average.

    (click to enlarge)

    (Source: Yahoo! Finance)

    BlackBerry's fiscal Q4 report is nearly here, and the bulls are hoping that the company will report a sequential revenue increase. New phone sales are key for this period, and the second foray into the tablet space could help later this year. For the turnaround to enter its next stage, a revenue bottom must be put in. Lately, BlackBerry shares have been heading lower, which could set up a key technical crossover of the 50-day and 200-day moving averages. I'll return next week to analyze the company's report.

    Mar 25 3:11 PM | Link | 3 Comments
  • 5,000 Followers And Still Going Strong

    Recently, I hit an important milestone on Seeking Alpha, and that is 5,000 followers. My success here on the site is due to this loyal reader base, and I wouldn't be writing if it wasn't for all of the people that continue to not only read my articles, but comment on them, send me messages, etc.

    So today, I'm here to say thank you to all that have made this possible. Additionally, nearly 600 of my followers are following me in real-time, which is the fastest way to get my articles. I encourage more of you to follow me in real-time to get stuff quicker. Thanks again, and let's continue to get these numbers up.

    Oct 28 9:29 AM | Link | 1 Comment
Full index of posts »
Latest Followers

StockTalks

  • Thanks to all who read or commented on my baker's dozen articles this week. Yes, things have been rather busy.
    Mar 12, 2015
  • $INTC warns, $CYBR prices secondary at $51. Both stocks hit this morning.
    Mar 12, 2015
  • $AAPL to the Dow perfect timing for $V split.
    Mar 6, 2015
More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.