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BlackBerry up slightly following FQ2 report, $934M inventory charge

  • With much of the bad news found in BlackBerry's (BBRY +1.5%) FQ2 report telegraphed a week ago (I, II), shares have ticked higher. However, they remain 11% below Fairfax's $9/share offer price.
  • BlackBerry wound up taking a $934M inventory charge, largely related to the Z10 (set to be repositioned as a mid-range device), and a $72M charge related to its restructuring program. The company's pending job cuts guarantee larger restructuring charges are on the way.
  • The company's FQ2 hardware/services/software revenue breakdown was 49%/46%/5%, a major change from FQ1's 61%/36%/3%. EMEA revneue -37% Y/Y and 44% of total; North America -52% and 26% of total; Asia-Pac -28% and 18% of total; Latin America -62% and 13% of total.
  • Going into the job cuts, opex -4% Y/Y vs. rev. growth of -45%.
  • As previously disclosed, there was no CC. More financial details will provided in filings next week.
  • Wells Fargo is worried about BlackBerry's cash burn ($500M in FQ2), and thinks the company should sell assets such as its valuable real estate to raise cash.
Comments (30)
  • I've been long BBRY and finally took the loss. Blinded by my love of the phone (Q1) and didn't take seriously all the mis-steps by the company. Zero marketing, botched BBM multi-platform launch. Such a disservice to long time shareholders, and a waste of a great product. Good bye BBRY, never again.
    27 Sep 2013, 02:03 PM Reply Like
  • Never let emotions get in the way of your trading. (AAPL) shareholders have found out that lesson to their cost over the past 12 months.

     

    Just move in and out of stocks based on catalysts and what the charts are telling you!
    27 Sep 2013, 04:04 PM Reply Like
  • BlackBerry needs to make a serious attempt at marketing the new Z30 which could have a positive spill over effect on the other BB10 models. Most consumers have no idea of it he unique features and benefits that come with the new O S. Now is the time to use some of the cash the company is hoarding.
    27 Sep 2013, 02:30 PM Reply Like
  • Hoarding is an interesting choice of words. Not sure the sentiment fits with what's actually happening. They are burning approx. $5m/day just keeping the lights on. They had $3.1b in June and have $2.5 now. I wouldn't call that hoarding. I'd call that bleeding, profusely.
    27 Sep 2013, 02:44 PM Reply Like
  • LMFAO. You have a new fan.
    The Z30....hmmm, a bigger version of their biggest loser and the delusion continues
    27 Sep 2013, 04:13 PM Reply Like
  • No it's much better than z10, much better quality. I just got it. I have all of them, q10 z10 and now this one. It's the best they have ever made.
    27 Sep 2013, 07:47 PM Reply Like
  • no carrier support to speak of,they need to continue to get out of the consumer business and go private and make prem watsa some money.theres nothing else
    27 Sep 2013, 02:43 PM Reply Like
  • tracey

     

    The carriers are mercenaries. If your product sells well, they love it. If your sales reps pay their sales reps to sell them, they love to show them off. If your marketing director gives them money for newspaper and radio ads, they will think you are one cool company.

     

    Otherwise, you are just someone else with something to sell. Yawn.

     

    You are right about the 'get out' angle.

     

    I do hope Watsa finds the route out. BBRY has too rich a history to be wrecked this way.
    27 Sep 2013, 02:57 PM Reply Like
  • Let get serious now about which is the real value of BBRY
    To arrive at the bottom line, is needed to call for an auction for Nov. 4th
    All interested parts invited!
    This can be conducted at BBRY headquarters in Waterloo and should be done by a crystal clear, money rock solid auctioneer!
    Prepare immediately a book with total details of all Assets and Liabilities, separated by categories and listing in complete detail from Inventories to A/P, A/R, Real Estate properties, Patents, etc. etc.
    Charge a nominal fee for the people interested in bidding and let them put a deposit or guarantee at least for half the amount that they are interested in purchase.
    At auction time, PW should be there as stalking horse offering at the bidding start the 9 $, if he really has secured the money that he claims in his BS letter will offer that day!
    Than the Auctioneer should establish a reserve and minimum price that eventually the auction could be called off!
    Now the bids should begin for the different lots in which should be divided all the assets of BBRY,
    After this had been accomplished and there is a total to compare with the PW offer, should start the Final Bidding for all assets combined of BBRY!
    At the end the winner could be PW, the company sold in pieces or the Final Bidder winner!
    They can close the auction and then all proceeds should be delivered to the Trustee for possible final distribution to all the shareholders, together with the Cash on Hand!
    That should generate substantially much more money than the PW bid!
    Now something strange is related to the App for BBRY for Android and iOS, as is possible that TH is holding on this great asset of BBRY until the company is delivered to PW if no other system of bidding is allowed!
    I think that the Chief Technology Officer of BBRY should be forced to a deposition immediately to find out is this apps can work now or not.
    Just for your information that BBM once in the other phones could provide the finest telephone calls crystal clear to anybody in the BBM worldwide and could be worth Billions! much better than WhatsApp
    TH, C'mon please retire this weekend, all will be extremely grateful to you! But refuse to collect your severance pay as gratitude to the people of Waterloo!
    How you can take 57 Million when 4.000 are losing their job and getting nothing!
    27 Sep 2013, 03:19 PM Reply Like
  • nice ....
    27 Sep 2013, 03:55 PM Reply Like
  • la cabanya, you are describing an auction of a collection of static items like pictures or furniture, where every piece has a determinable value and might still have that next quarter. BBRY is the dynamic sum of a number of interacting parts that might not even work separately, where the value is purely a function of the ROE at any time. We have seen articles on this subject what could be sold piecemeal and what would not stand alone. What you describe makes no sense at all, but what tops even that is the suggestion that after the auction of the pieces parts has ended, the real auction begins for everything together.
    27 Sep 2013, 05:24 PM Reply Like
  • Blackberry=Sears Holdings.

     

    Only accounting gimmicks have keep this dog afloat.
    27 Sep 2013, 04:34 PM Reply Like
  • Blackberry Q2 2014 as expected – Disappointing @ http://stks.co/gmyd
    27 Sep 2013, 05:01 PM Reply Like
  • Definitely the timing of many things were not perfect, and the marketing was a waist of money. They only need to rectify the issues, and continue to restructure.
    Hopefully the next quarter will be much better now that they're thrown in all the negative all at once in this quarter.

     

    Sales, and sales, is what they need, and the negativity toward the company and BB10 conjured up by FACT-less rumors and no sense speculation, not to mention carrier employees telling people BBRY is on the verge of bankruptcy, incomplete false information. That alone help kill overall sales.

     

    Get the Z10 and now the Z30 into people's hands and they WILL REACT AS WOW, Awe, this is awesome. BB10 represents the future of mobile computing and is currently the only platform that can do it.
    BBRY fire your marketing team and contract out the marketing with a company that knows how to bloody advertise.
    Yes, getting the Z30 ASA its released.......
    27 Sep 2013, 05:05 PM Reply Like
  • Ellas!

     

    Whoa, buddy, whoa! Jabil, the company that builds their phones is taking a loss of its own and shutting down BBRY manufacturing in November. There is no turnaround, no enhanced marketing, no cute Super Bowl jingle. T Mobile is tired of (not) selling them.

     

    If you want a new cool BlackBerry phone next year, go to work for a big company that might use or need BES. Watsa may be able to keep that end alive for ya, but they probably are not in your neighborhood phone market in 2014.

     

    $9 is the new normal - hope for it.
    27 Sep 2013, 07:30 PM Reply Like
  • Ellas - Of course, you spent the whole past month proclaiming loudly that Blackberry was not for sale, that the purpose of the special committee was simply to hone their strategy for improving BB10 sales, and that there was no negative news coming in the first place.

     

    Why do you believe that your newest set of proclamations will prove to be any less delusional than the last batch?
    27 Sep 2013, 08:23 PM Reply Like
  • BB started out making pagers, they can do it again. Go long and strong.
    28 Sep 2013, 12:36 AM Reply Like
  • "BlackBerry up slightly following FQ2 report, $934M inventory charge"

     

    dead cat bounce. why would anyone waste their time on this company? You can throw JCP in too.
    27 Sep 2013, 08:01 PM Reply Like
  • what we saw today was only a convergence to the $8 strike on options expiration. Wouldn't put anything else into it now, have to wait till next week.
    27 Sep 2013, 10:12 PM Reply Like
  • Will get a bounce next week on the Barron's story this weekend.The stock will soon be a trading vehicle for a month at least.
    27 Sep 2013, 10:47 PM Reply Like
  • The bids in the Auction work this way:
    PW shows up and start the firm bids. As he is the stalking horse!
    offers the price with 100% guaranteed money on hand! No reserves at all!
    Then starts the lot by lot offers and at the end of that time you have a number that could be lower or greater than the first bid.
    And at the end the final bids for all in one lot starts taking in consideration the existing bids!
    Is done later because give the chance to the bidders that improve the existing bids and take all together!That way the owners get the benefit of the best price!If the total amount reached by separated lots remains the best, the Auctioneer sells to the separate bidders and the Auction is closed!
    27 Sep 2013, 11:27 PM Reply Like
  • la cabanya, this is totally naiv! As I have explained to you before no auction process works this way. It would require dozens of bidders for the pieces and at least several for the sum total. No bidder would have patience for this! Why should a bidder for everything pick up the high bid for a piece? This piece might have different values for each. Add that all of them are entitled to a due diligence process, it becomes impossible. You can't even do a yard sale on that basis.
    28 Sep 2013, 10:44 AM Reply Like
  • you lost me right here, "PW shows up and start the firm bids. As he is the stalking horse!"

     

    back it up for a second. first step before all that is Prem finding $5B to support the bid. that seems to be an important detail don't you think?
    1 Oct 2013, 02:42 PM Reply Like
  • What happened during the last few months at BBRY raises serious questions about the management.
    Today there is a need for explanation of why they didn't book as sales 5,9 million smart phones that were sold to final customers during that period. Are they selling on consignment or are them already included in the A/R. or are in Inventories. Looks like very strange accounting and the Auditors should know what is going on, and we as investors need cristal clear explanations
    It really looks that the company is cooking the books and want to give bad news in order to preserve the price to be aligned to the bottom offered by PW.
    We believe that TH, BS the DB and PW had grossly mismanaged and manipulated the company at their convenience!
    PW signed on the 57 Million compensation for TH termination,
    Now TH, BS and the DB signed on the 150+ Million for PW for his
    BS Letter of Intend that he can scrap at his wish! By the way how BS still is Chairman and where are her credentials for dealing with that highly complicated company! When you fire 4.000 dedicated people because the company is starting to lose money you don't give Millions away to anybody! That simple! The money belong to the shareholders and is not property of the management at all! If they manage with total irresponsibility they may deserve to serve some prison, as they are stealing money that is not of their personal property! I want to point that people had lost Billions of Dollars in BBRY, as other had made the profits, but if the law had been broken at any time the people responsible should bear the consequences! So the clock is ticking and the time arrived for us to hire some Securities Criminal Lawyers that can look in deep into the manipulations in BBRY during the last few months, including what happened with the promised launching of the Android and iOS Apps,
    now frozen (nobody knows why, but we should take depositions on the subject from the Chief Technology Officer and others!
    TH is going to have big problems if we can proof that they had been playing games, cooking books and bypassing General Accepted Accounting Practices in the numbers for their personal or their friends benefit!
    That is just the start.
    Will check with the Lawyers what else is appropriate to review as at this moment everything coming from BBRY looks very dark, that is not clear at all!
    Maybe somebody should go to jail here, if some people are serving a few years for tipping an stock, we think that people that fouled honest investors deserve a lot more harsh punishment.
    Anybody agrees?
    27 Sep 2013, 11:49 PM Reply Like
  • @la cabanya

     

    Yes, exactly. When I read the quarterly earnings report and the way the phone sales were presented, I asked myself the same question: Are they actively trying to make the company look bad?
    Because no other phone maker is that strict regarding reporting phones as "sold". All other players in the game mark a phone down as sold as soon as it leaves one of their warehouses.
    On the other hand, they are not consistent, they are actively advertising all other good progress.
    So I think BBRY management is just overdoing the "honest reporting and thereby gaining investors confidence" principle.
    And that Thorsten Heins is in it for the quick buck is something which I don't believe. I think he has a vision about mobile communication and computing, he already tried to realize that while he was working at Siemens, but that didn't go anywhere.
    I think BBRY is right now in a transition.
    BBRY used to be to the phone market what Toyota is for the car market.
    Huge market shares, global leader producing for the masses.
    BBRY had that role in 2008 in the phone market.
    But those days are gone forever, Apple and Samsung have that role now.
    BBRY now needs to be what BMW is for the car market, purveyor of high quality cars with a distinct image, not quite luxurious but upper class and, that's the important part, as a company smaller in size and revenue than Toyota.
    Now the BB10 phones are already there, but BBRY is still stuck with a size of operations and number of staff from its "Toyota" days.
    Just remember that manoeuvre about the company jet couple of weeks ago, some members of management have not understood yet.
    So the primary challenge is now to get BBRY down from "Toyota" level to "BMW" level, and that quick.
    Once it is there I would expect (though I might be wrong) that BBRY can establish itself as one of the leading providers of professional mobile communication and computing.
    28 Sep 2013, 12:13 AM Reply Like
  • I really don't get two things...

     

    Why the big concern from Wells Fargo regarding high rate of cash burn for the quarter and need to raise cash immediately by a fire sale of assets which are only increasing in value (prime real estate)?

     

    * Yes $500M is huge (a little over $150M per month) BUT consider that this is due to building up a huge surplus inventory of product (over production) which has been addressed along with to large a payroll based (also addressed) it this rate should not continue. Also, even at the current rate, BBRY could keep going more than a year before getting into problems.

     

    The other thing is why BlackBerry is doing such a poor job of marketing the benefits of the BB10 platform (and 10.3 in particular) such as ability to run most Android Applications, best compatibility with HTML5 Applications, etc. If they had opened their App Store up and simply added 'Ready to Run' Android applications and HTML5 Applications they would have had more Apps than either of the other App Stores plus could have even opened the AppStore up to other OS being a repository for others to access HTML5 and perhaps even Android programs. Very few programs really needed to be BB10 specific.

     

    This gets back to the other kink - I have seen nothing in marketing pushing other strengths of the products such as the superior handling of weak signal strength, replaceable battery, and support for wireless HDMI connectivity. Marketing seems to have just 'expected' people to buy the product because it is from BlackBerry... but why would people buy for that reason after the way the past few products have under performed (they already lost the 'bought on faith' mindset of the public).

     

    Regrouping makes sense... going after the mainstream market without the marketing to create a sensation was insane and a waste of resources. If they weren't serious about going after the mainstream they should have made these changes the start of the year.

     

    Some of the actions in this quarterly report seem to be intended to 'artificially' make this quarter look worse in order to make the next quarter look like a turn around quarter.
    28 Sep 2013, 09:33 AM Reply Like
  • From a few BB10 ad, I can feel Blackberry is trying to picture its product "cool", "hip", and "of youth". It's almost promoting the handset as a fashion item.

     

    Was it a wrong strategy? Can't say it has no merit. Was it a hit? No, I guess. The message is not connecting to the largest audience. And for a mobile phone, you need to sell one model to a large enough number of people in order to break even, otherwise you lose money, a lot of money. A phone is one commodity item, not the combinations of a thousand fashion items. And in that sense, the strategy of marketing it like a fashion item fails.

     

    There's a big difference between iPhone and BB10. One connects to large audience. The other connects to a small audience, (with taste, maybe, or different taste). Both of them are quality products. But their designer and marketing take a totally different route, or philosophy, to connect to their end customers. And we all see the results.

     

    As a retail investor, I long both company. But the results seem to be different. And specially, Blackberry doesn't give its retail investors a long term option, or a long enough term option. It's going private, or being bought out, after two quarters of selling its new BB10 products.
    28 Sep 2013, 10:23 PM Reply Like
  • "Also, even at the current rate, BBRY could keep going more than a year before getting into problems."

     

    that's a familiar refrain. "even if they burn X per quarter they can survive for X years!" they need to show that, IF they burn cash, it will set up future growth. you can't burn $500M/quarter with no realistic hope of making it back, and expect anyone to buy a share of your stock (or ALL the shares as it appears).

     

    "before getting into problems"...man, they got into problems in 2011. that ship has sailed.
    1 Oct 2013, 02:58 PM Reply Like
  • They are trying to make things look very bad as the sales reported not included 5,4 million smart phones that reached final consumers last quarter (so where effectively sold!) and the totally unexpected (by us) failure that froze the launch of the app for Android and iOS.The Machiavellian plan is to make the company look the worst ever and to lower much more the price of the shares in order to benefit PW, so he can come in, liquidate and pocket billions, that ultimately BS, TH, the DB will be able to share via fiscal paradise accounts.
    Remember PW is in the deal for himself only, not for the shareholders, he is not putting any money, and as of this moment he wants to use the BBRY millions on hand not to improve the performance of the company, but looking only for his personal benefit and of his pal TH, his Chief Cooking Officer and others!.How about the issue of the 200 Million just for PW and TH or 10% of all cash on hand that they want to take home, at the time that 4.000 families are suffering the lost of the jobs!Shame if that is allowed to happen!How are we going to feel if in a few months the real BBRY (that we don't know today anymore) is looking again totally healthy and putting billions in the pocket of PW and associates.We are going to feel like the biggest idiots on earth!If today they are forcing issues to make things look very bad and suddenly BBRY became great, some people will have to go to jail!We should try to stop that to happen by proper litigation!We should start hiring early next week a couple of the best Criminal Securities Litigation lawyers in Canada that should start legal procedures against them before TH, and his team destroy more the company and is too late to stop them!I don't know if SA would let us list the e-mail address and the name of the Lawyers in Canada so the people that want to joint the effort could get together!
    28 Sep 2013, 10:23 PM Reply Like
  • I hope the take over fails, I think Fairfax would get a far too cheap deal to the disadvantage of other investors.
    I don't believe it's a good idea to remove BBRY from the market and thus from the scrutiny of critical shareholders.
    Ask yourself: If already being private would the BBRY management really have admitted the dimensions of the Z10 failure (commercially, most of those who own it, love it.)
    Would they have taken the hard but necessary steps to shrink the company?
    Hardly. The BBRY management would probably still think themselves as equal to Apple and MIcrosoft instead of recognizing the reality:
    Providing professional communication tools and software is a big business, but not as big as providing consumer hand held devices.
    BBRY was both in 2008 but now has to reduce itself to the former.
    (It might grow again after a successful turnaround but that's far ahead). And the necessity of this downsizing is forced upon BBRY by the fact that they are a publicly traded company with quarterly results.
    So, keep it that way.
    28 Sep 2013, 11:33 PM Reply Like
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