Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

The Bullish Case For Blackberry

|Includes:BlackBerry Ltd. (BBRY)

I would like to suggest an idea in which I have great conviction, Blackberry (NASDAQ:BBRY).

I will keep this short and simple

Reasons to be long Blackberry

Underestimation of potential

The recent launch of the BB10 devices represents the innovative power of Blackberry. It isn't stuck in a rut as what the market believe it is. Also, many reviews have said that the BB Z10 is a solid product and while it isn't all that innovative, it represents a start. I believe that the market have inadequately account for this innovative potential.

Proprietary system

Most of the major players in the Smartphone industry use the Andriod operating system. Examples are Samsung, HTC and LG. On the other hand, Blackberry uses its own proprietary system. This is a great plus point for Blackberry as it is my belief that the Andriod system would eventually be marginalize and some subscribers would be eventually lured to Blackberry, increasing its market share.

Upside potential

According to the IDC, Blackberry devices only hold 4.7% of the Smartphone market share, while Andriod and Apple devices hold about 83%. Referring to point 1 and 2, if Blackberry is able to snatch just 10% of the market share from Andriod and Apple, Blackberry market share would increase 176%. What a great upside potential right. This figure does not even include the expansion of the Smartphone industry.

Top Smartphone Operating Systems, Forecast Market Share and CAGR, 2012-2016

Smartphone OS

2012 Market Share

2016 Market Share

CAGR 2012 - 2016 (%)

Android

68.3%

63.8%

16.3%

iOS

18.8%

19.1%

18.8%

BlackBerry OS

4.7%

4.1%

14.6%

Windows Phone

2.6%

11.4%

71.3%

Linux

2.0%

1.5%

10.5%

Others

3.6%

0.1%

-100.0%

Total

100.0%

100.0%

18.3%

Sources: IDC

Downside risk

Tangible book value of $11.67 per share

Cash and equivalents, ST investments and net accounts receivable of $9.55 per share

From the figures above, one can see that the downside risk for Blackberry is rather low, a 33% downside to cash and equal, ST investments and AR and an 18% downside to tangible book value.

Potential takeover candidate

It is my belief that large pool of private equity cash, strong corporate balance sheet, low interest rates environment, attractive valuation and a very healthy Blackberry balance sheet make Blackberry a potential takeover target. Potential acquirer could be private equity firms or the major Smartphone companies that wish to gain access to Blackberry proprietary network.

All in all

I believe Blackberry is a good and obvious strong buy. Evidently it is a turnaround/growth strategy and I believe that the time horizon and price target for Blackberry is tentative to management actions in various factors such as R&D or capital allocation.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BBRY over the next 72 hours.

Stocks: BBRY