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  • Taking The Long-Term View On BlackBerry's Latest Quarterly Results [View article]
    Wrt to the lower revenue mentioned in the article, another aspect is how the math works. Think I forget to mention this in my prior post. If you have a 50% reduction, you would need 2x of sales in order to break-even on revenue basis.

    Simple Example: original $500 price per unit, you cut 50% to $250. Suppose you originally sell 1M units, you would need to sell 2M units to get the same revenue ($500 million). So if you only sells 30% more (1.3M units), you would actually lose $175 million in revenue in this case compared to original. That is what I mean that the large discounted sale actually hurt revenue. They could have sold less units at higher price and got more revenue. I doubt that even with a large discount, people would run and get a lot of Blackberries. Its demand is definitely less elastic than other phones. The goal was to clear out inventory, not to get the highest revenue.

    I appreciate your comment but would prefer if you keep your comment in a professional tone as well.
    Dec 24, 2014. 01:49 PM | 2 Likes Like |Link to Comment
  • Taking The Long-Term View On BlackBerry's Latest Quarterly Results [View article]
    Agree with a) since currently it acts like a normal debt. Don't agree with b. I never said it'll become an asset. I said equity. Assets can't increase because the nature of accounting equation Assets = Liabilities + Shareholder Equity (or equity in my short form). If you decrease liabilities by converting the debt, any changes of assets must be negative, not positive. Also, you shouldn't say liabilities side increase. It is actually the liability and Shareholder Equity side (see equation). But the transaction of converting is neutral (decrease liability, increase equity. Or in accounting lingo, you debit the convertible bonds and credit shareholder equity) since balance sheet must remain balance.

    Finally, I do agree that the conversion doesn't change the liquidation value but it does change the opinion of the riskiness of the company since many still view the convertible debt as straight debt. Or worst, they subtract the MV of debt (not contracted par value) from the cash balance to get a really low net cash balance. Converting would solve this misconception.

    If what I said was confusing, I suggest a review of balance sheet accounting and basic debit and credit theory. They'll help you understand the nature of any transaction.
    Dec 24, 2014. 09:31 AM | 2 Likes Like |Link to Comment
  • Taking The Long-Term View On BlackBerry's Latest Quarterly Results [View article]
    Here is an explicit wording on that in MD&A for the analysts and investors: (pg 40 of PDF http://blck.by/1z83tLa), challenging quarter in terms of revenue in Q4 before picking up.

    ---

    The Company anticipates maintaining its strong cash position, while increasingly looking for opportunities to prudently invest in
    growth. The Company is expanding its distribution capability primarily through redeployment of internal resources and expects
    to begin receiving benefits from these efforts sometime in fiscal 2016.

    The Company reached its target of break-even cash flow results in the third quarter of fiscal 2015 and continues to anticipate breakeven
    or better cash flow from operations. The Company continues to target sustainable non-GAAP profitability sometime in fiscal
    2016. The Company anticipates a challenging fourth quarter of fiscal 2015 in terms of revenue, followed by revenue stabilization
    and eventual return to revenue growth sometime in fiscal 2016.
    Dec 24, 2014. 09:06 AM | 4 Likes Like |Link to Comment
  • Taking The Long-Term View On BlackBerry's Latest Quarterly Results [View article]
    mapodga,

    When the bond converts, it is equity which is not debt. In accounting, equity is not consider liability or debt in layman terms.

    For convertible holders, they eventually want to get converted to receive higher returns and the bond is already in the money, making the company's call option (on the bond) valuable. Any higher price, they'll probably convert or being forced to. This makes the security more like equity rather than bond.

    The conversion will be dilute shareholders by 125 million shares, that's true. In theory, this is worst for valuation but the debt is the last item the negative analysts can point that may hinder the company's long term survival. Removing this would make the company look better financially.

    Conversion also benefit standard valuation multiple since it boost book value (current is $6.50 and conversion will add $1.25 billion equity, which is accreative to the per share book). Also, it would remove the analysts' argument that the company "net debt" position is bad since debt is eliminate through conversion.
    Dec 24, 2014. 08:59 AM | 1 Like Like |Link to Comment
  • Taking The Long-Term View On BlackBerry's Latest Quarterly Results [View article]
    The sale does increase revenue but analysst also care about this metric call ASP (average sale price) and the sale impacted that. I understand the sentence is a bit confusing but remember Chen has a focus on inventory control. The older models take up inventory space and must be clear to get the inventory of new products in. The reason Passport didn't sell much is because the company didn't want to take much inventory risk. Taking the older model away allows the company to take more inventory risk and sell new model which have higher revenue and margins. ASP was $180 last quarter and probably be near $150 if it wasn't for the 200K Passport. Thus, 1.8 million older BB 10 is actually equal to around 600K, in terms of ASP, of newer model.

    Overall, it's the ability to take inventory risk that will allow the company to sell more newer models. The math works out that you don't need much replace the older models' revenue given the substantially higher ASP, which you'll find an explicit guidance in the MD&A about higher ASP going forward. Recall I also wrote that expect unit sales to drop dramatically in the future because of this.
    Dec 24, 2014. 08:45 AM | 1 Like Like |Link to Comment
  • Taking The Long-Term View On BlackBerry's Latest Quarterly Results [View article]
    I don't want to go too technical but the debt is convertible debt, not conventional straight debt. The debt gets converted at 10.00. If prices stays above 10 for like 6 months or more , it is likely the holders will convert. Even if the holders don't convert, there is a call option for the company to call the bond at 104% of par.

    All on all, I view the bond as equity, not debt like most analysts. While it is debt, as long as the company is a going concern, the convertible debt should be considered equity especially the convert option is in the money.
    Dec 23, 2014. 09:34 PM | 3 Likes Like |Link to Comment
  • Can Long Run Exploration Sustain Its 30% Dividend Yield? [View article]
    Thanks for the article Chris.

    I really like the stock especially sub 2. Really bought a lot after it fell below $1.50 and added another big block Friday morning at $1.25. Price may still go down in the short term, but it looks good for patient and value oriented investors. Even if they cut the dividend, the yield will be a big add-on to total return.
    Dec 12, 2014. 11:50 PM | Likes Like |Link to Comment
  • Suncor's Q3/2014 Earnings: Decent Results In A Challenging Environment [View article]
    DrT, thanks for reading. Not only did the stock recovery more than most, it also declined less from its June peak than most other oil stocks. Some smaller E&P, especially on the Canadian side, lost more than 50% since June. I'm comfortable with my exposure in Suncor even though there is a commodity risk I'm taking. I like management and I like its integrated strategy of capturing the maximum value in the value-chain.
    Oct 31, 2014. 10:48 PM | Likes Like |Link to Comment
  • See The Bigger Picture On BlackBerry's Latest Financial Numbers, Outlook And Strategy [View article]
    @LTI0723, that is my assumption but historical launch pricing has always been in the $700 range and they had lower specs. Classic's specs are similar to Passport so I don't see a low pricing below $599 (that's the promotional price for Passport). I think the price may be high but very reasonable compared to competitors, which have lower specs.

    @ZarethKnyght. Considering the Bold (which is more than 2 years old) is priced at $430 on ShopBB.com, there is no way Classic will be that low. The demand is mostly from enterprise who prefer the old interface of the belt and short-cuts. The Bold, despite its age, still sold well (700K) last quarter. Chen already stated he expect a major upgrade cycle from the Classic. Think he's taking his time perfecting this device since it's the big elephant in the room. 80% of the current 46 million subs are enterprise. Even if a small portion upgrade, it'll still be a few million device sales. I think analysts are pricing in less than a million for both Passport and Classic, which is ridiculous in my view given the large user base.
    Sep 29, 2014. 05:21 PM | 1 Like Like |Link to Comment
  • See The Bigger Picture On BlackBerry's Latest Financial Numbers, Outlook And Strategy [View article]
    Not me. Article said: "... the cash flow position should improved further with a large reduction in royalty fees (in the line called "acquisition of intangible assets" on the cash flow statement)." This has already been somewhat reflected in figure 3's cash flow statement under "acquisition of intangible assets". The run-rate has reduced from $300 million per quarter to just $124 million last quarter. Q3 will probably get a further ~$20 million decrease so overall would add up to ($300-$100= $200 million per quarter or $800 annualized savings). Hope this math helps.

    PS: Agree with Passport. Will get one soon.
    Sep 29, 2014. 10:08 AM | 2 Likes Like |Link to Comment
  • See The Bigger Picture On BlackBerry's Latest Financial Numbers, Outlook And Strategy [View article]
    I appreciate Mr. Kulbinder Garcha's analysis but I think it's just the difference in how we interpreted the information (see article vs what you posted). I don't think BBRY needs to shut down hardware and hardware performance will surprise in the next 1-2 quarters with Classic and the rolling-out of Passport. Losses are well contained and is on a path that is different than Mr Garcha's -$0.50 estimate for FY 15 (first half -$0.13) and -$0.64 for FY16. I don't mind that analysts are keeping their expectations low. If management delivers, they eventually have to to raise their outlook.
    Sep 29, 2014. 09:35 AM | 4 Likes Like |Link to Comment
  • See The Bigger Picture On BlackBerry's Latest Financial Numbers, Outlook And Strategy [View article]
    I stand corrected, thank you for pointing it out in your last post. I have submitted a correction.

    But even after the numbers change, it doesn't look as dire. While total replacement now is only 35-46% (that includes the $66 million per quarter from software in addition to the $25 million for BBM), one important point to keep in mind is that the revenue loss is front-end weighted (and diminishes over time) while revenue replacement is back-end weighted. Eventually, I believe the service revenue will get replaced but not likely in the next few quarters. The plan Chen laid out is a start but I agree with you my old inflated numbers are overstating the story.

    I still stand by my comment regarding the improvement in hardware. Without negative GM contribution from hardware, overall GM will be better.

    Anyways, thank you for adding to the discussion and pointing out the mistake I made.
    Sep 28, 2014. 02:32 PM | 2 Likes Like |Link to Comment
  • See The Bigger Picture On BlackBerry's Latest Financial Numbers, Outlook And Strategy [View article]
    Luck definitely helps Chris. However, there is also a good underlying hardware strategy in place so the luck is just icing on the cake.

    Personally, I think Passport grabbed a lot attention because it's so different. A square screen is laughable at first but it's definitely a concept that grabs attention and triggers some curiosity. That could be the reason why there was a huge demand at launch.

    Finally, you are right that the specs (especially the specs to price ratio) are excellent compared to what's on the market.
    Sep 28, 2014. 01:18 PM | 4 Likes Like |Link to Comment
  • See The Bigger Picture On BlackBerry's Latest Financial Numbers, Outlook And Strategy [View article]
    As 6372381 pointed out, It's all about Chen's cross platform strategy. Notice that Chen has even expanded BlackBerry's offering to Windows in order to increase the customer base. With BES 12 (launching in November), it will likely be the main driver for software revenue. Also, don't forget the new BlackBerry Blend service introduced on Wednesday. That could also be a major contributor to revenue.

    There is also BBM. Big opportunity there given how valuable messaging is now. BlackBerry can offer secure and productive solutions to enterprises through the eBBM program. Products launch include BBM Protect, BBM Meetings, BBM encrypted voice etc. The enterprise market is definite much smaller than consumer (for WhatsApp, Line, WeChat etc.) but enterprise customers can be more valuable on a per user basis since all would want to pay to get extra security.

    Also, let's not forget about QNX and the IOT strategy, a point Citron identified in June. That could also be huge as well.
    Sep 28, 2014. 01:12 PM | 5 Likes Like |Link to Comment
  • See The Bigger Picture On BlackBerry's Latest Financial Numbers, Outlook And Strategy [View article]
    Thanks for providing the link to readers qh2o. I saw that interview as well and have to agree. There is no way he can stop the SAF (service fee) decline. What he did was to improve on margins and made hardware profitable, at a pace much faster than I anticipated. Last quarter's cc, Chen said it may take "a few" more quarters to make money on hardware, but he achieved it in one quarter. He's also doing everything he can to plant the seeds to replace the SAF with software revenue. I'm seeing very positive indicators for demand of BES 12, Blend etc.
    Sep 28, 2014. 01:05 PM | 5 Likes Like |Link to Comment
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