Seeking Alpha

BlackBerry slips; Pac Crest notes purchase commitments

  • BlackBerry (BBRY -3.5%) is giving back a portion of its recent gains. Shares still +15% since Reuters' Aug. 9 report about the company's willingness to go private.
  • Pac Crest's James Faucette (previous) argues today BlackBerry's $5.3B in off-balance-sheet purchase obligations (inc. $4.3B in purchase order commitments) will limit the company's buyout premium.
  • On the other hand, many think BlackBerry's patent portfolio could fetch a hefty sum. MDB Capital's Chris Marlett recently estimated the portfolio is worth $2B-$3B.
  • On Wednesday, Nomura argued a bid above $12-$13/share in unlikely.
Comments (21)
  • Who still believes anything Pac Crest says?
    16 Aug 2013, 12:54 PM Reply Like
  • Fully agree, Pac Crest past assumptions have proven to be nonsense. Who takes them serious anymore.
    16 Aug 2013, 02:47 PM Reply Like
  • Pac What? The guys who, if they had real clients, would have cost them 30% this week had they purchased when BB was low and then sold?

     

    If these guys were intelligent, they'd tell their short clients to cover rather than wait for the -$5 share price. Going to be difficult to manipulate the price if a bid comes in.
    16 Aug 2013, 01:07 PM Reply Like
  • It is quite obvious that Pac Crest has an agenda. Their biggest clients are hedge funds. Guess who has shorted BBRY? You guessed right, hedge funds.
    16 Aug 2013, 01:08 PM Reply Like
  • Just have to state the obvious: Guess who has been right so far? Hedge funds.

     

    Before being branded as a Pac Crest gunslinger, I know nothing about them other than their - ahem - distaste - for BBRY. I've never shorted a share in my life (of anything).

     

    I was long BBRY until having a good conversation with my T-Mobile rep who explained how poorly the sales had gone for them. I live in MSFT country so I took that with a grain of salt, but his observations were spot-on. BBRY is still featured in many newspaper ads here in the Seattle area along with iPhones and Samsung, but the ads have not driven demand.

     

    Now that there is a whiff (or worse) of controversy surrounding where BBRY will be in a year, those sales trends will not improve.
    16 Aug 2013, 01:20 PM Reply Like
  • Agree with Randal James on this. However, it helps to point out that the US smartphone market is no longer a model for global smartphone markets. I think where BBRY made a mistake was in launching high end in saturated markets. They would have posted better numbers hitting low end devices in low end Asian markets. Growth in smartphones will now come through Asia more than other established markets.
    16 Aug 2013, 05:51 PM Reply Like
  • Herr Hansa

     

    I suspect you are correct about what they might have done. In the grand gamble, I think they looked at Samsung with lots of low-end stuff, and with NOK with more of the same and plenty of startups and decided their reputation would carry them further in the upper deck. This isn't working out so well, though Michael Blair has a piece out tonight suggesting he believes otherwise.

     

    But if they want a ticket to Asia, it is going to take $200 devices, not twice that.
    16 Aug 2013, 07:03 PM Reply Like
  • The Nokia Asha is a good example of a target. Xiomi is another, but the company structure makes it easy for them to be low cost. The BlackBerry YouTube Channel is very interesting in that there are far more southeast Asian videos than anything else. I haven't seen much of examples of marketing in Asia, but I think that is what the company should be doing.

     

    Brand does have some value, but BBRY chose a very bad director of marketing. You cannot just put phones on shelves and expect them to sell.

     

    To be fair, they do have the keyboard market well addressed, and there are end users who want those devices. Almost seems like a touch screen introduction was too much of letting the pundits dictate the product launches.

     

    The future metric is user base. The company was profitable in 2010 with 45 million users. Now with 72 million users, and lower profits, BBRY really need to trim the fat and cut expenses. It's good they spend more on R&D than some other companies, though I think their workforce has simply become too large.
    16 Aug 2013, 07:27 PM Reply Like
  • $MSFT most likely buyer for $BBRY. They would use all the product and put WP on the Blackberry phones as an option perhaps or only later.
    16 Aug 2013, 01:32 PM Reply Like
  • WP really can't compare to BB10. QNX is superior in every way and more secure. In this respect MS either adopt BB10 or stay away.
    16 Aug 2013, 02:55 PM Reply Like
  • Interesting that on the major phone carriers (USA), the highest-rated phones are Nokia. Higher than iPhone, better than Samsung, and even better than the few responders who had actually purchased a Blackberry.

     

    Tough choice for both sides:

     

    Hmmm... should I keep my phone, it's not as secure as a Blackberry!

     

    Hmmm... should I keep my Blackberry, I'm not even sure they'll be in business before my contract runs out.
    16 Aug 2013, 03:02 PM Reply Like
  • Bear raid was expected folks. Old habits die hard.
    16 Aug 2013, 02:13 PM Reply Like
  • Is this the same guy who b e l i e v e d " return rate of z10 more than people buying it"? To best of my knowledge, BB has filed complain against him with SEC for knowingly giving falsified information to manipulate market.
    16 Aug 2013, 03:56 PM Reply Like
  • Nobody knows 100% what will happen.....but as long as fairfax Prem Watsa owns 10% I'm confident a deal will get done. My guess is minimum 10 billion which would be almost a double from here. Motorola was purchased for 12.5 billion and there patents and balance sheet were not as good as blackberrys.
    16 Aug 2013, 05:44 PM Reply Like
  • Between FY2011 and FY2012 the Purchase Obligations and Commitments drop by about $5.9 billion, however I can`t locate the corresponding cash out-flow. Is it hidden within the Cost of Sales?
    18 Aug 2013, 06:51 AM Reply Like
  • Now that Z10 is written off (largely due to Z10 that will not be built but have a minimum purchase commitment), it's fair to wonder who much BBRY is obligated to purchase for Q10, Q5 and Z30.

     

    It's kind of ironic when the longs were so excited about each product launch, they don't realize the extreme downside to this endeavor. Billion dollar mistakes.

     

    This may be real bad, if they have to lower build just like the Z10 (and I can't see why not), I can see another $1B-2B in additional writeoffs. They'll be paying their vendor (obligated) without receipts from customers (uncertain) BK looms.
    21 Sep 2013, 03:21 AM Reply Like
  • I think your assumption of the writedown "(largely due to Z10 that will not be built but have a minimum purchase commitment)" could actually be wrong. First, a lot of the parts for the products are interchangeable such as the snapdragon cpu etc. Second, the Z10 is where they were overzealous and therefore most of the ambitous PO's were commited. The NRE that isn't going to be amortized with canceled orders is probably in the number as well. Friday's release could actually be the total cost of Pac Crest's $4.3 billion shock & awe number above. This may be the "kitchen sink" moment for BBRY. Pays to be long volatility here as we see the rest of the story unfold.
    21 Sep 2013, 04:47 AM Reply Like
  • It's a bit funny, in an ironic way, to see my comment above (BBRY really need to trim the fat and cut expenses) move to the forefront of company activity. However, I am not satisfied with the timeline of the company, now targeting Q1 2015 as the time of saving a Billion on expenses. Certainly not a good outlook for 2014.

     

    I still think shares are massively speculative, and the options plays vastly dominate trading volume. As always, I do not recommend investors hold, nor purchase shares. Even when playing options, there is a great possibility of getting it wrong, especially on weeklies.

     

    CEO Heins needs to move much more quickly. Amongst the cuts of employees, he badly needs to dump the CMO in a hurry. If they want to continue to cater to business clients, then a rugged (and maybe waterproof) smartphone needs to be developed. Make a MilSpec smartphone, and release a version for active consumers. Push the lifestyle, and by that I don't meaning boring off people wearing suits. We've seen the progression to niche, and many people have suggested that, so BBRY needs to act more like a niche company.
    21 Sep 2013, 06:14 PM Reply Like
  • H Hansa

     

    "CEO Heins needs to move much more quickly."

     

    I think if given the opportunity to vote, many shareholders would approve of giving Heins a 30 minute head start - before turning loose a team of hungry sled dogs.

     

    Possible TH quote before the contest: "Oh, they'll tire long before I will."
    21 Sep 2013, 06:31 PM Reply Like
  • It almost seems that Heins was brought in as an ax man, simply to cut down the company, and return it to being a niche. BBRY had fewer employees a few years ago, despite a much smaller user base. At this point, unless Heins can show profits before the annual meeting, he better be practicing his running skills.
    21 Sep 2013, 07:03 PM Reply Like
  • He is Mad.....http://seekingalpha.co...
    22 Sep 2013, 11:50 AM Reply Like
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