Tech, mid-cap, medium-term horizon, long/short equity
Tech, mid-cap, medium-term horizon, long/short equity
Contributor since: 2013
I agree but also disagree... the problem with your analogy is that you are comparing apples to limes. Yes both may be classed as 'fruit', but otherwise they appeal to very different tastes and serve different purposes. WatchDox was designed to specifically to address the growing concern 'security aware' enterprises have with Dropbox.
The leap is not the slider. The leap is a mid / low range device targeted at cost sensitive buyers NOT BlackBerry's new flagship device.
It is not just the 'security' aspect which drives enterprises to buy BBRY devices, what is just as important has traditionally been factors such as battery life (knowing the device will still have a charge when needed), and above all else durability. Drop an iPhone on he sidewalk and you have about a 50/50 chance it will survive... drop traditional BlackBerry and the only time you are surprised is when it breaks.
Panasonic has made a business out of their 'tough book' notebook like which despite selling only a tiny fraction of what any of the other notebook manufacturers sell still earns Panasonic a nice profit.
Just a question...
I am not about to argue that BBRY 'is in the lead', but at the same time I have to question a list which places Apple as #1. At least with BlackBerry real world initiatives can be named (i.e. NantHealth & Automotive). Other than their involvement on various research organizations, I can't find a single example of how Apple is entering the IoT segment... unless of course you consider 'Smartphones' and 'iTunes' as part of the IoT segment.
Some of the others on the list, like Samsung which is focused on the 'device side' of the equation and intel which is focused on the embedded components, although significant to the big picture of 'IoT are far from potential competitors to the secure connectivity layer that BlackBerry is going after.
The problem with this scenario is that people for some reason don't have any trouble paying the $700+ for a fashion statement (which is when it comes down to it what having an iPhone is all about). This includes those in China based on how well the iPhone is selling over there.
For me carrying around an iPhone doesn't make me feel 'special'... but I never believed much in status symbols. I don't see how carrying around a iPhone (or an AmEx Platinum card for that matter) changes who you are or how others view you.
Personally I refuse to pay for a name, or replace something every year or two just because it isn't the latest model... if it still works and does the job I keep it. But maybe that lust to keep upgrading is the norm... which I guess may even help explain why the divorce rate remains so high.
The economics of the marketplace have to change in order for Apple to get into trouble. As long as people are willing to pay $50/month for cellular service including a 'free iPhone' the fact that the iPhone costs $700 while a Lenovo may only cost $200 yet have similar functionality doesn't matter a hill of beans.
What will matter is when some new technology comes around to 'replace' the current 'style' of smartphone with something uniquely different. Lets Face it, almost every smartphone on the market isn't really the different from the iPhone 3/4/5... on the other hand going from the old BlackBerry to the iPhone was a huge step.
David653 - Question for you...
Your comments on long on general criticism and short on specifics (other than criticism of the new devices BlackBerry has released which have been well received in the niche markets they were intended for which goes counter to your criticism).
BlackBerry crashed badly by trying to go head to head in the consumer marketplace last year... while the financials are looking much better now with a focused emphasis on the enterprise segment - even most analysts are admitting that BlackBerry will survive, the question now simply being what a fair market valuation for the company is.
What exactly is it that you would like to see management to be focusing on if not the enterprise managed mobile device segment??? What exactly do you see wrong with the current path and where Chen is taking the company???
I had written off the idea of BBRY hitting $15 this year (and along with that any chance I had to make money on some January calls I had at $14). With the stream of positive news lately I might actually make some money on those...
It should not be overlooked that this goes a long way to address the edge that the IBM/Apple partnership has when approaching corporate prospects and that is that Apple has a mobile tablet while BBRY doesn't. With Samsung bringing Knox enabled tablets to BES12, a huge hole has been filled.
I can't see any downside to BBRY working with Samsung. Unlike the case with BBRY working with Lenovo, with South Korea considered an ally (unlike China), existing and prospective clients shouldn't see the ties as presenting security concerns.
It should not be overlooked that this goes a long way to address the edge that the IBM/Apple partnership has when approaching corporate prospects and that is that Apple has a mobile tablet while BBRY doesn't. With Samsung bringing Knox enabled tablets to BES12, a huge hole has been filled.
I can't see any downside to BBRY working with Samsung. Unlike the case with BBRY working with Lenovo, with South Korea considered an ally (unlike China), existing and prospective clients shouldn't see the ties as presenting security concerns.
My only 'question' is 'Why Now?'.. the timing doesn't seem to make much sense.
As others have pointed out, the Canadian Government has already squashed the idea of Lenovo taking over BlackBerry (a year ago) and since then there has been a lot of turmoil in China which would likely reinforce the 'anti China' sentiment in government.
I am surprized that the Apple Conspiracists haven't jumped on the rumour as being an attempt by 'Evil Apple and IBM' to scare enterprises away from BlackBerry's BES and other business focused initiatives.
That said, given how quiet both BlackBerry and Lenovo are being, along with Lenovo's stated intent to make a push into the enterprise market in 2015, it is likely that the companies are in talks of some type... but a joint venture or licensing arrangement is far more likely. But does it really matter to the investor IF the news is 'buyout' or 'joint venture' or 'licensing' as any one of these would justify an increase in share value.
As a small investor, what does it matter if the shares are 'bought out' at $15+ or simply reach that level due to market pressures? Either way you can sell your shares for $15. Don't jump on me for suggesting that BBRY will jump to $15, just picking an arbitrary number to make a point.
If NantHealth were to publically announce that they were in 'exclusive alliance' with BlackBerry to manufacturer hand held devices to interface with their system AND that they had, after examining solutions by IBM & Microsoft (for example), selected BBM Protect as the 'backend' infrastructure for their system, it would likely have had a much larger impact on BBRY share value than simply BlackBerry investing in NantHealth along with a vague comment regarding the joint development of a new BlackBerry device for NantHealth.
Don't get me wrong, there is huge potential BUT be careful not to bet caught in the hype and realize this simply is another reason to warrant including BBRY as part of the 'speculative stock' component of your portfolio. Simply there is too much speculation and not enough hard fact at this time regarding the possible payoff.
Problem is that, unlike HP, each of the 'divisions' within BlackBerry are integrated and to a certain degree dependent upon one another. How would you split the company?
(1) Network Infrastructure
. (a) Traditional Service Subscribers
. (b) BBM Services
. (c) New Cloud Services
(2) Devices
(3) Software
. (a) Enterprise Software
. (c) Mobile Software
(4) Patent Litigation
The situation with HP was very different. The 'new HP' had two very different identities and product lines - Computing and Instrumentation - each requiring a completely different management style for success.
Good point regarding 'shipped' versus 'sold'. Has anyone seen the 'actual' wording of the statement by Chen regarding the 200K number? Most publications suggest what Chen stated was that 200K were SOLD in the first few days of sale NOT that 200K were ordered.
200K SOLD would be a very positive indicator, while as you point out 200K SHIPPED would be of far less significance.
I am surprized that one of the analysts who track parts shipments to manufacturers hasn't piped up details regarding how many Passports have actually been manufactured - this information was readily available in the case of the Z10/Q10 products.
It will be interesting to see if Zipperstein sells the other of the rights he exercised. Selling half and keeping half could be taken from the proverbial glass half full or half empty perspective.
Personally I have lost a lot of faith in Zipperstein... although he had a strong background in patent litigation he hasn't seemed to be able to deliver the hard hitting patent litigation that held so much potential for BlackBerry. The patents purchased by BlackBerry from Nortel alone appeared to have the potential to generate billions in revenue considering that they cover what is the core to Google's advertising revenue generation ability (and for which reason Google was willing to pay a kings ransom to obtain when Nortel was selling them).
I think you nailed it on the head. With the 'better than anticipated' initial sales I wouldn't be surprized if AT&T significantly increased the number of Passports they had on order from BlackBerry which in turn could have extended the shortage of supply for online sellers.
However, it would be foolish for BlackBerry to significantly increase manufacturing based upon short term demand (and in particular how every many phones AT&T may pre-order). Look at how overproduction of the Z10/Q10 (based on initial demand from service providers and even preliminary sell through numbers) worked out for the company.
From an enterprise account perspective, other than obtaining a few units for initial testing (which I am sure that BlackBerry will have already made available to major accounts) the shortage of supply in the short term will have no impact on long terms sales. The testing before new devices are rolled out usually takes months, by which time BlackBerry should have a better understanding of what the actual demand is going to be.
Marketing (aka Advertising) can be extremely expensive and the problem for BlackBerry is where to focus efforts. Personally I could see it making more sense to hold off marketing the Passport (and Classic) until BES12 is available and market the entire bundle in a single campaign aimed squarely at business and government in appropriate venues.
I don't see it making a lot of sense at this point in time to spend a ton on marketing the Passport in the general press as it is not the market that they are currently focused on. IF by chance the Passport starts to catch on with the large market, then and only then would I feel that spending money in this area might make sense. REMEMBER the Passport (and the Classic) are targeted products aimed at specific market segments NOT products intended for the general marketplace.
If you actually look at the numbers the opposite would appear to be the case with new large investors more than making up for those investors who are getting out.
It is going in be interesting over the next few weeks as the holdings numbers for September start leaking out to see what direction major holders are headed. IF we see a noticeable change, this could well drive smaller investors in a big way.
Realize that with a company with a market cap as small as BlackBerry that even one large investor choosing to come in can have a huge impact on institutional ownership numbers. There are many institutional 'investors' who don't think twice about investing $100M in turnaround prospects which with BBRY's current market cap would equate to a 2% change in ownership. However, it is not the actual change which would be as significant as the major vote of confidence.
"On that basis, the Passport outsold the iPhone by more than two to one."
When comparing initial Passport to iPhone 6 sales, don't overlook a few other key factors:-
(1) The Passport was a 'sell out' while I have yet to find any retailer who doesn't have the iPhone 6 in stock. This makes it impossible to know comparatively how well the two devices are selling since the sales of the one were capped while the other wasn't.
(2) The Passport was launched in a few select markets, while the iPhone 6 was a global launch into all markets.
(3) The Passport has seen only a fraction of the media coverage and tiny fraction of the advertising that the iPhone 6 has seen.
(4) As most sales of the Passport were through direct marketing efforts, it is likely only a fraction of the sales reported relate to channel sales (i.e. channel stuffing). On the other hand a large number of the iPhone 6+ reported sales likely relate to channel stuffing. Out of curiosity when I was in to a local BestBuy (Saturday Afternoon following the launch) I asked them how many iPhone 6+ they 'still' had for sale. I was told 9. When I asked how many they had received since launch I was told 12. From Apples perspective, the 'reported sales' would have been the 12 they shipped to BestBuy NOT the 3 sold by BestBuy.
I am not suggesting that the Passport, if not for these factors, would have sold in the numbers the iPhone has sold BUT simply that it is very possible that it would have sold significantly higher than it ddi WHILE the real sales of the iPhone 6x are significantly lower than the numbers reported.
Very interesting perspective, but I think you are overlooking the fact that BBM in the big picture has not been able to penetrate the social media cloud to any large extent. I'm sorry, but if your not in the top 10 your simply not a player and if your numbers are correct their are very few markets where BBM cracks the top 10. Interestingly absent from your stats was India which has been talked about elsewhere as one of the key markets to watch... I assume that they are another market where BBM doesn't even crack the top 100.
On a brighter side, your research regarding the Japanese market is of particular interest. IF, as your regional numbers for Japan suggest, in developed markets (which would include the US, UK, Canada, etc.) the majority of the users are professionals and business subscribers I agree that this may bode well for the company's long term prospects. If in fact BBM, although being 43rd overall in the US market, was the #1 choice among business professionals, then the table turns with regards to, as you point out, the prospects for things like eBBM. I would love to see statistical data with regards to BBM penetration by demographic profile.
The other concern that I have after reading your research is with regards to your statement:
"It is sitting at the 101 or 102 area. Sometimes, the rank fluctuates lower. For example, in the last 30 days, it has dipped to 217th place, though now it sits at 102 as of Oct 2nd."
This type fluctuation is typical of those with statistically insignificant positions. Think about it this way, if you survey 100 people in a City with a population of 100,000 and of those 50 prefer Brand X you can be fairly confident that about 50% prefer Brand X. But if only 1 person says they prefer Brand Y, it is quite likely that if you did another random survey of 100 different individuals that the next time the number for Brand Y would be something other than 1 - likely either 0 or 2.
I often read comments such as 'BlackBerry is set to release the Classic device in November, a move that wins back former fans.' I would be really interested to know how large the remaining subscriber base is for existing BB devices.
One problem' faced by BlackBerry could be that they built their devices too well... unlike the case with the iPhone where your just about guaranteed that after about 18 months your going to start having battery problems and at the end of a two year contract your going to want to get rid of the device, I know many people with older BBRY devices who simply don't see a need to upgrade.
Much like the old days with the Motorola Flip phones, the 'classic' BBRY device does what it was designed to do extremely well (voice and messaging) and is like an old friend that once comfortable with their is little need to upgrade. It will be interesting with the new 'classic' if by marketing a 'next gen' phone as an upgrade to an 'old friend' if those still with legacy devices can be enticed to finally make the switch to BB10. This installed base still represents a very significant number of users who could be enticed to transition to the classic.
IF this happens, it will be interesting to see how investors react to the 'initial' impact on the financials. The higher the number who are enticed to make the transition the greater the negative impact will be on subscriber revenue.
Don't forget that as long as BlackBerry is trading over $10/share that 'convertible debt' should instead be seen as stock dilution as conversion to equity is the probable outcome.
Monetizing BBM in developing markets hasn't gone dark, the problem is that their has been no talk about the initiatives outside of those markets. BBM Money has been seeing significant acceptance in Indonesia. Just last week when I went to order some martial arts supplies from a craftsman over there I was asked if I could use BBM for payment instead of PayPal which I had used for previous purchases as he explained it is now the preferred method of payment for most of his local customers. Although perhaps an isolated example, still for me it was an indication that BBM is alive and well outside of North America.
Similarly, initatives like stickers were also a targeted effort for these markets as they have less appeal in the North American markets. I agree that we haven't seen as much talk recently BUT don't necessarily consider that to be a negative indication that the initiatives aren't proceeding.
The factor that many may be overlooking is how easily the numbers if released could be misinterpreted. Currently nearly 10x the number of SmartPhones are sold in the US as there are in Indonesia. IF BlackBerry reported sales of 500K Z3 devices for Indonesia, too many would jump on the number as 'weak sales' simply because for reported sales in the US Market to be significant the number would have to be much higher.
Moreover, it is very possible that as the Z3 is essentially a Foxconn device produced under license from BlackBerry that it is Foxconn who has decided that they don't want the sales numbers to be reported.
That said, what I am more interested in knowing rather than hard sales numbers for the Z3 (or Z10 in India for that matter) is how well BlackBerry is doing at retaining market share in these markets AND more specifically how well BBM is doing in these regions. From all accounts, in Indonesia it doesn't really matter what smartphone is sold (Andoid / BlackBerry / Apple) in the end the messaging platform or choice is (or at least was) BBM. If still the case, this equates to a significant potential service revenue source.
"Hardware revenue was up 11% sequentially, but to my dismay, service revenue declined 19% versus the quarter-ended May 30, 2014."
Don't take the decline in service revenue as an indication that Chen's initiatives to revitalize the service revenue side of the business are failing... it is too early to tell. Service revenue still includes a large chunk of revenue from legacy subscriber based service fees which are being phased out - until this is broken out separately from other service based revenue it is simply impossible to know how well the service side of the business is doing. When BlackBerry stopped reporting subscriber base the only clue at what portion of the services revenue consisted of traditional service subscribers was lost to the average investor.
It is too bad that BlackBerry's auditor hasn't come down hard on the lack of transparency in their financials. It would be easy for an auditor to argue that ongoing revenue on the books relating to 'traditional' subscribers fees are in effect temporary revenue from discontinued operations and thus a required disclosure. The only conclusion that can be drawn from the drop in service revenue as stated is that the rate of decline in revenue from subscriber base still exceeds the rate of increase of new service revenue streams and the rate exceeded the rate predicted by Analysts.
The higher rate of decline combined with the increase in BB10 sales may in fact be a very positive indicator of long term health. It could suggest that the rate of BB10 adoption in enterprises is on the increase. Every BB7 device replaced by a BB10 device equates to another loss to subscriber revenue (i.e. service revenue).
PLUS don't underestimate the impact the 'free initial support for those migrating to BES10' has on the financials - I suspect that this is the reason that Chen is predicting such a huge increase in software revenues in upcoming reporting periods... simply the fact that those who took advantage of the 'free migration offer' will soon be paying monthly licencing fees.
The following is the best explanation I've seen of the absence of Verizon at the launch of the Passport.

My read is that BlackBerry believed that Verizon would no longer need a CDMA version by the time the Passport was released. As noted, late 2014 was originally when Verizon had indicated that they would start phasing out CDMA and it was only recently that they pushed the life of CDMA out to 2016.
This would appear to be confirmed by the fact although a part number exists for a CDMA Passport, it isn't anticipated to be available until January. Four months from the time the LTE version launches till the CDMA comes out would suggest that it was only added as an afterthought when it became clear that it would be required by Verizon.
Wow, you actually found a retailer who stocks BlackBerry devices?
I wanted to have a look at one in person so popped into a few local cell phone retail outlets (Bell, Rogers, Best Buy) and not one had one in stock. Not only that, not one had any BlackBerry devices in stock - the sales person at Best Buy thought that BlackBerry was in bankruptcy and that was why they no longer carried them while the Bell & Rogers outlets both indicated that no longer marketed BlackBerry devices at the retail level as they were now exclusively marketed by their corporate account sales force and thus were only available by special order at smaller retail outlets.
When I specifically asked about the Passport, neither the salesperson at the Bell or Roger outlets (the two largest cell carriers in Canada) were even aware that BlackBerry had introduced a new phone. How things change in a just a year.
I never said that their weren't positive reviews, just that the reviews were mixed with many reviewers coming across critical of what turned out to be what reviewers now fairly universally see as the devices strengths. Have a read through:-
For one of many which were less impressed with the 'new' design and failed to see the products eventual success.
Their is a massive skew to the numbers being reported due to the declining subscriber revenues from traditional network service fees. Unfortunately these are not broken out well enough in order to strip them out and build a model of what the companies 'ongoing service revenue' is actually doing - i.e. are new initiatives starting to generate revenue and how much?
I couldn't care less that the companies gross revenue is still in decline - that is to be expected. For the longest time BBRY had a true cash cow - subscriber fees - and declining revenue at this point in time has everything to do with these being phased out and much less to do with the overall health of the business.
Unless Apple is going to open up Apple Pay as an open standard I doubt it will have than much of an impact on anything. When has identity security or security in general every been a consideration for the 'iFan'? How many people think twice about using their credit card info online at a retailer they have never heard of before but who offers the best deal?
Just because Apple Pay may offer better security than NFC, who really cares? If the average phone user really cared that much about security then BBRY would still have a much larger market share.
Also, realize that Apple Pay is more of a competitor for NFC (targeting POS type retail transactions) than one for the BBM Wallet concept. As I have written previously, think about going out to lunch with a friend - NFC/Apple Pay provides the means to pay the restaurant for the meal while BBM Wallet, although it could be used to pay the merchant as well, extends the concept of 'electronic money' to allow you to pay the friend you went to lunch with for your half of the bill rather than having the restaurant split the bill. Think of it as a replacement for cash rather than a replacement for credit cards.
In developing markets, this differentiation is a big deal as far more transactions are between individuals and fewer are with traditional retailers with POS terminals required for NFC / Apple Pay payments.
The other factor to keep in mind is that to be successful requires that BBM have a fairly high market share since both persons involved in the transaction require a BBM account. In certain markets like Indonesia this is in fact the case, thus BBM money provides a barrier to entry for competitors making BBM the 'must have' application.
"was first introduced months ago."
Many sources suggest that the device design is much older than that, and was at least conceptually in the works long before the Z10 (which all said was more of a response to the iPhone than being a 'traditional' BlackBerry device). What Chen did when he took over was to see that potential in returning to BlackBerry's roots and fast tracked development pushing aside various other initiatives in the works to ensure the product made it to market in a timely fashion.
But what professional could live without watching movies in true 1080HD resolution?
Is someone suggesting that he might actually prefer a device designed to make his life easier when working on correspondence... what a load of horse crap.
I agree with you, I doubt that BlackBerry was expecting to sell more than a few million annually and thus would be very surprised if they had more than a few hundred thousand ready for sale at launch.
BlackBerry could not survive a third production disaster like the PlayBook or the Z10 where they built 10x more than they were able to sell. Chen is too smart a chief to allow that to happen PLUS from an image perspective selling out and creating the perception that their is a shortage is a good thing. If the 4 Million number is correct (2M ATT / 2M Direct), I suspect that number was for the entire year and at most perhaps 500K were available.
That said, even a few 100K would be very impressive.
Don't forget that the Passport is NOT a device which is being manufactured by Foxconn so BlackBerry has to be far more careful as they are fully exposed to inventory risks associated with weak sales.