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  • The Launch : All-In Bet For The BlackBerry 10  0 comments
    Feb 6, 2013 11:34 AM | about stocks: BBRY

    Blackberry (Nasdaq: BBRY/TSX: BB)

    Formerly Research in Motion (Nasdaq: RIMM/TSX: RIM)

    The Launch

    The BlackBerry 10 was launched on January 29th, after a long-awaited period. The new BlackBerry 10 smartphones come in two different models: with a touch screen (Z10) offering an alternative to Apple (NASDAQ: AAPL) and Google's (NASDAQ: GOOG) Android based smartphones or with a physical keyboard (Q10) for their BB enthusiasts, both running on the new QNX-based operating system.

    Source : RIM Z10 BlackBerry

    For the past few weeks, the share price was subject to speculations reaching more than 17$ a share. As a matter of fact, after the launch, the shares slumped 12% suggesting investors to speculate on the stock. Although at 13$ a share, the price is still appealing for investors.

    Despite some innovative features, I remain skeptical about the possibility to regain the market share loss to Apple iPhone and other devices powered by Google's Android operating system. BlackBerry should retain its specialized market base with the Q10 smartphone, giving estimate sales around 28 million units worldwide with $11 billion in revenue by end of fiscal 2014. The devices are now available in the UK and will be available in Canada on February 5th, but the Z10 will not be released in the U.S. until March and the Q10 until April. Quite disappointing for American enthusiasts.

    To make the launch of the new BlackBerry 10, the company changed the application store to "BlackBerry World", dumping the "App" word from the name. The new app store will count 70,000 apps, rather small compared to its rivals. Benefiting from the launch exposure, Research In Motion announced that its name will be changed to BlackBerry. Effective today, the stock tickers are in the U.S. and (TSX: BB) in Canada.

    Releasing the BlackBerry 10 and its new operating system has proven to be costly. Revenue for the third quarter of fiscal 2013 was $2.7 billion, down 5% from $2.9 billion in the previous quarter and down 47% from $5.2 billion in the same quarter of fiscal 2012. Profit was $9 million but dropped drastically from $265 million the previous year. The firm has not given much insight on the retail price of the new BlackBerry 10. It should be a little higher than the iPhone 5 according to Bloomberg analysts, depending on the carrier and the package offered.

    Will the new features of the Blackberry 10 attract smartphone users to switch? The operating system looks astonishing at first, packed with new features. BlackBerry Balance feature allows a clear distinction between personal and corporate content as well as a super-fast browser and should be valued by most users. The BlackBerry Hub feature integrates many types of social communication into a single place and users can reply within the hub and without actually opening the application. Useful for any Facebook (NASDAQ: FB) addict. On the downside, omissions like Netflix (NASDAQ: NFLX) app is difficult to pass by. Adding behavioral inefficiencies, expert users will soon get tired of the operating system environment.

    Renewing with past success

    Only time will tell. In my opinion, BlackBerry lost much ground to its competitors. The BlackBerry became wildly successful in early 2000s gaining almost 20% in the smartphone market share. Despite early success, companies like Apple and Samsung have flown past the company in the smartphone race. As we speak, the company controls a mere 2% market share in the North American smartphone market.

    RIMM Book Value Per Share Chart

    Undervalued at this time according to Recognia's Value Analyzer, the equity's return rate could go up to 120% by looking at the chart below.

    On value alone, the equity's price is appealing. Unfortunately, the risk goes with it. The sales of the BlackBerry 10 should stabilize after the initial launch generating around 28 million units by the end of the fiscal year 2014 and should rise between 30 to 32 million units by the end of 2014. You should expect a decrease in sales around 10% per year until 2017.

    Bottom Line

    Will the launch of the new BlackBerry 10 be too little too late? The answer lies on customer's reaction. Once dominant on the handset market, I think this was a high stake move for Blackberry. In my opinion, the company's future should not have relied only on the new operating system.

    RIMM Gross Profit Margin Quarterly Chart

    In the short term, investors should profit from the coming sales, translating in a more valued stock price. The share price could rise at $20 a share before the end of 2013. I estimate that the gross profit margin should get back around 40% as well. These benefits should be sustained unless major issues emerge from the new device. I recommend selling the stock before the beginning of 2015 unless the sales are up to expectations.

    BBRY 16.02$ at opening on February 6th


    Source : Seeking Alpha

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

    Themes: Technology, Smartphone, Long-ideas Stocks: BBRY
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