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BlackBerry shooting higher; Chen expects FY16 profits

With a lot of bad news priced in, BlackBerry (BBRY +13.6%) has shot higher following its FQ3 report, as investors applaud a Foxconn deal that (for now) will limit BlackBerry's in-house phone design work to a limited number of high-end enterprise devices. Talking to CNBC (video), John Chen asserts the deal will help BlackBerry become profitable by FY16 (ends Feb. '16).

Chen: "The number one thing I noticed (as CEO) was that our handset volume was dropping and with that, our [fixed] cost was too high ... [Foxconn] has the ability to bring the cost down ... The focus of the overall company is shifting toward enterprise, government customers and software services."

With BlackBerry expected to lose $1.37/share in FY14 and $1.10/share in FY15,  a return to profitability in FY16 would represent a major turnaround.

Also: On the CC (transcript), Chen stated BlackBerry is aiming to become "cash flow neutral from operations" in FY15, and expects "reasonably good revenue" from BBM around the FY16 timeframe.

Short-covering is likely contributing to today's gains: 33% of the float was shorted as of Nov. 29.

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Comments (33)
  • LYogi
    , contributor
    Comments (2921) | Send Message
    It wouldn't surprise me to see those time frames halved with Chen being ultra conservative in his estimations.


    Mostly because consumer tech preferences can be so fickle, the market is set to mushroom and in this case BlackBerry has the goods once consumers and enterprise begins waking up to the advancements the company has to offer via the incredible BB10 platform which, even in its infancy, is already miles ahead of the competition.
    20 Dec 2013, 02:31 PM Reply Like
  • bud zeedee
    , contributor
    Comments (546) | Send Message
    Easy for you to say. We won't know for certain until we hear from Marcap and Andreas whether BB will still be around.
    20 Dec 2013, 03:12 PM Reply Like
  • ATInsider
    , contributor
    Comments (424) | Send Message
    Great point. Chen has a great plan, just hope they beef up marketing.
    BB10 is beyond Android and iOS, and yet it hasn't even scratched the surface yet.
    20 Dec 2013, 04:54 PM Reply Like
  • samuel_liu
    , contributor
    Comments (2798) | Send Message
    "Chen has a great plan"


    The mobile universe is iOS and Android.
    20 Dec 2013, 10:28 PM Reply Like
  • Seriouspatt
    , contributor
    Comments (509) | Send Message
    Your world is too small. Think big.
    20 Dec 2013, 11:46 PM Reply Like
    , contributor
    Comments (306) | Send Message
    Haven't seen Marcap on these boards in a while. Wonder what's up. Think he went long?
    21 Dec 2013, 12:38 AM Reply Like
  • DumpsterDiver
    , contributor
    Comments (331) | Send Message
    Great news: The Thorsten Heins era is over, and Blackberry's future is no longer reliant upon everyone "waking up to the advancements the company has to offer via the incredible BB10 platform." Which, frankly, the overwhelming majority of them will never do anyway, because they're perfectly content with the platforms they're already using.


    I understand that you guys sincerely love your phones. But I'm quite confident that when you're looking back on Blackberry's progress a couple of years down the road, it'll be pretty clear that BB10 was the least important part of the story.
    21 Dec 2013, 05:40 AM Reply Like
    , contributor
    Comments (306) | Send Message
    Note. Note 2 user. BB - 10 - good stuff.
    21 Dec 2013, 11:43 AM Reply Like
  • LLAmos
    , contributor
    Comments (10) | Send Message
    I hope not. Competition breeds innovation.
    21 Dec 2013, 12:07 PM Reply Like
    , contributor
    Comments (56) | Send Message
    @bud zeedee
    You left out YONGZHOU & RANDAL.
    21 Dec 2013, 12:23 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (6633) | Send Message
    Old BB7 phones are still outselling BB10 phones 3:1, that is the main reason for concern imho.


    BB10 has not gained any momentum, there was no traction in 2013, how and why should this change in 2014?


    On the contrary, I see more disappointing smartphone numbers and lower margins in hardware going forward.


    I see no future for BBRY in phone hardware, it may survive as a much smaller company with the three other divisions, similar to what NOK did after selling its consumer hardware to MSFT.


    Until that transition/exit is complete, BBRY is a daytrading stock, I wouldn't touch it as an investor.
    22 Dec 2013, 03:04 AM Reply Like
  • pat45
    , contributor
    Comments (419) | Send Message
    Gee will lose $1.10 next year but be cash neutral... love our accounting. Hope for profits in 2016 but real loss will be?? Bbry big hope is for buyout before outa money.
    22 Dec 2013, 07:36 AM Reply Like
  • Robert Castleman
    , contributor
    Comments (288) | Send Message
    Finally. Some focus! Play to strength.


    This could be a very interesting year for BBRY.
    20 Dec 2013, 03:48 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (1154) | Send Message
    Yeah. I'm sure this "2016 turnaround plan" will work a lot better then the previous 8,137 plans that BBRY management as announced over the course of the last several years. (only a "slight" over-statement)


    BBRY is a "trading stock". Period. It probably will never be anything more then that at the rate they are burning through the cash on hand. Under $6.00 - and probably closer to $5.00 - the stock begins to looking interesting. As a long term holding? I'd rather hit myself in the head with a hammer.


    Disclosure - No current position in BBRY.
    21 Dec 2013, 11:31 PM Reply Like
    , contributor
    Comments (306) | Send Message
    @wispoker says:


    " the rate they are burning through the cash on hand..."


    Operating cash burn was $71 mill this Q AH.
    22 Dec 2013, 11:39 AM Reply Like
  • WisPokerGuy
    , contributor
    Comments (1154) | Send Message
    I should have been more specific.


    BlackBerry's operating cash flow for the first nine month of fiscal 2014 stood at $405 million compared to $2,093 million for the first nine month of fiscal 2013 (down 81%).


    Now BBRY can adjust their business plan and restructure all they want, however, recovering from an 81% cash flow loss under any circumstances is fairly difficult, no?
    22 Dec 2013, 12:56 PM Reply Like
  • Cliff Hilton
    , contributor
    Comments (2463) | Send Message
    Marcap, Mr Knowitall and Andreas have provided us with good direction, but we didn't want to shed the long position.


    I would like to get their take going forward.


    Yes, they got it wrong today, I did too. I thought for sure the SP was going lower. I still have all my shares, hoping for the historic turnaround. We'll see.
    20 Dec 2013, 04:59 PM Reply Like
  • hz06
    , contributor
    Comments (1297) | Send Message
    @cliff - one more, sfinvestor


    i agree with his take on JCP, btw
    22 Dec 2013, 01:01 AM Reply Like
  • KIA Investment Research
    , contributor
    Comments (12205) | Send Message
    Hiya Cliff et al,


    While my puts expired worthless, my overall position on BlackBerry's turnaround prospects haven't'y changed all that much.


    I think the deal with Foxconn was a smart move as it will slow the BlackBerry cash burn, but I would raise the following questions:


    1. Are emerging markets in or out?


    On the one hand we have this from the Globe and Mail:


    "Devices : Company strikes joint device development and manufacturing agreement with Foxconn; initial focus of partnership to be development of a consumer smartphone for Indonesia and other fast-growing markets in early 2014"


    And then on the other hand we have this reported here:


    " as investors applaud a Foxconn deal that (for now) will limit BlackBerry's in-house phone design work to a limited number of high-end enterprise devices. "


    In any case, having Foxconn design and manufacture was a good move.


    2. Foxconn, the DoD, and other governmental agencies.


    It is my understanding that Where, How and by Whom something is manufactured is an element that factors into the approval process for most governmental agencies. I would suspect that at a minimum these new devices will require an new and fresh approval. All things being equal, they'll probably get it, but it will be a minor(?) setback in any government/military push.


    3. Nothing has really changed.


    With the exception of setting expectations low and saving cash on hardware design and manufacturing, nothing has really changed. BlackBerry's phones and other offerings are no more appealing today than they were one week ago.


    4. So what Did change?


    I think all that happened is that BlackBerry has bough themselves more time; mostly through the installation of (IMHO) misplaced confidence.


    And here's my issue; I wasn't really bearish on BlackBerry because I thought they didn't have enough time to implement their turnaround strategy, I was bearish because I didn't like what they were offering, especially as it compares to the competition, and in light of the competition's agility.


    In summary; I will probably continue to short on what I deem rallies of irrational exuberance, and day-trade the stock meantime.


    Congratulations to any that were able to profit of this last Friday's rally.
    22 Dec 2013, 02:43 PM Reply Like
  • LYogi
    , contributor
    Comments (2921) | Send Message


    To clarify your questions. My understanding is that Foxconn is contracted to help.with low cost emerging markets while BlackBerry will be maintaining control over production of high-end enterprise devices. That alleviates concerns that you mentioned.


    A lot of us who have the phone beg to differ with your opinion on what the company offers. The reviews for all devices are stellar, especially the Z30. Now add to that they can now run Android apps, better than android by some accounts, and once the general public understands they can have the best of both worlds with a secure device and you have a winner.


    I'm already so long and I'm considering buying as much as I can on margin.
    22 Dec 2013, 03:20 PM Reply Like
  • KIA Investment Research
    , contributor
    Comments (12205) | Send Message
    We can argue next week. This post was just a clarification of my current thinking. I will look closer at who's making which devices and for what markets over the following days.


    "I'm considering buying as much as I can on margin."


    I suggest you go back and meditate on this one master yogi.
    22 Dec 2013, 03:50 PM Reply Like
  • jamesingram32
    , contributor
    Comments (578) | Send Message
    KIA, yogi is correct. Foxconn-lower end, bbry-higher end. As dumpster and many others highlighted though BBRY future is less around the devices, and more around the security services. Chen pointed this out many times on friday.
    The power of the foxcon partially lies in the potential ability to divest of the device business without huge cost, or indeed, the huge traditional inventory writedowns on the road to the end.
    that + short squeeze = big pop.
    However, while I think this euphoria could continue there are some issues overlooked on friday.
    1) Chen expects/HOPES for bbry to return to profit in 2016. so...2 more years of cash burn!
    2) like you said bbry are still getting their butts kicked at the high end by aapl, and NOK/msft even took their no 3 slot.
    3) the low end is a busy place with slivers of margin, crowed out by chinese and indian upstarts.
    4) ' events dear boy, events' as a prime minister once said. hope to get profit by 2016? A lot can happen between now and then


    saying that Chen is no bbry have that going for them!


    Good luck all, and happy christmas
    22 Dec 2013, 07:55 PM Reply Like
  • hz06
    , contributor
    Comments (1297) | Send Message
    @mr. kia - Foxconn deal has potential. in the mobile handset business, the designers have been using the manufacturers as slaves for a long long time. BB is the first one who breaks this rule. if the deal works out well (it's already looking good by letting Foxconn sharing the margin), BB-Foxconn will gain market shares, quicker than the competitors can react.


    even Xiaomi will have problem, what sells smart phones is software 80% hardware 20% (imo), with BlackBerry working hand-in-hand with Foxconn, together they cover almost everything in the handset business, as one company.


    i agree with the day trading approach in 2014.
    23 Dec 2013, 11:01 AM Reply Like
  • hz06
    , contributor
    Comments (1297) | Send Message
    @LYogi - i wouldn't want to use margin no matter how good the stock looks like, it's only stock.


    no matter how sure we longs are about blackberry's future as a company, there are as many people holding a different view, that's what makes a market.


    my BB position is large in terms of the size of my accounts, but it's still contained no matter what happens to blackberry.


    it's not unheard of that some (newbie) shorts using margin and were wiped out completely on Sunday afternoon. on the other hand, someone i indirectly know rode AIG all the way down with 100% of his savings because he wanted to average down...
    23 Dec 2013, 11:33 AM Reply Like
  • jamesingram32
    , contributor
    Comments (578) | Send Message
    hey, I just switched to long, shares and calls in BBRY earlier today, so I will not hear a single word said about them. no, no, nothing.
    They are perfect,,,,until and if obviously I sell again.


    That's how it works investing in bbry right? :p


    Hey, I've said it before, I'll say it again.


    Good luck all, whatever your positions, and have a great Christmas guys, and a VERY profitable new year :)
    23 Dec 2013, 11:36 AM Reply Like
  • Christopher Wallace
    , contributor
    Comments (1253) | Send Message
    hz06 raises a good point. BBRY may have potential but it will be a bumpy, risky ride back, if in fact that is how it ends up. Anyone who is super high conviction, up or down, is not reading the reports. There is good and bad news coming for BBRY. I went long after the ER with small $, anticipating this to be a trading sardine. I don't see any argument (yet) showing BBRY to be a high conviction, back up the truck, long....or short, for that matter. For now I will buy the dips and sell the rips, with small dollars.
    23 Dec 2013, 11:41 AM Reply Like
  • jamesingram32
    , contributor
    Comments (578) | Send Message
    fair point chris.


    for a while today, i was short and long, and was thinking of staying so.
    it's a volatile stock. But, for the moment, the momentum is all up. Not one for the bottom drawer though, this needs constant attention.
    23 Dec 2013, 12:25 PM Reply Like
  • samuel_liu
    , contributor
    Comments (2798) | Send Message
    lyerbaby20 10 hours ago
    My company is already replacing blackberrys with windows phones. It doesn't look good for them.


    seo2seo 9 hours ago
    @flyerbaby20 No, it doesn't. They'll soon regret switching to Windows phones.
    20 Dec 2013, 11:04 PM Reply Like
  • SA_Member_8998191
    , contributor
    Comments (163) | Send Message
    Lol hey remember all those people who bashed on me when I sold $BBRY short @15??


    now they're playing in the streets over a bounce to not-so-near-52-week-lows.


    doomed company.
    21 Dec 2013, 10:48 AM Reply Like
  • tranamal
    , contributor
    Comments (47) | Send Message
    Maybe Marcap, Mr. Knowitall and Andreas are all busy trying cover their shorts that's why we haven't seen them making any comments the last two days.
    21 Dec 2013, 11:01 AM Reply Like
  • Seppo Sahrakorpi
    , contributor
    Comments (2142) | Send Message
    Or perhaps they are enjoying their well earned Holidays w/ all the money they made being long $NOK earlier this year, and shorting $BBRY from $12-15 down... :)


    This latest 20% bounce from the all time low is not gonna break these guys...
    21 Dec 2013, 11:45 AM Reply Like
  • DumpsterDiver
    , contributor
    Comments (331) | Send Message
    Well, sure, they may have been consistently right at every turn and made money all year long as a consequence, but they're totally getting coal in their stockings this holiday. 'Cause if you weren't long Blackberry the entire way down from $18 to here, that makes you BAD PEOPLE, and Santa knows this.


    You dared to suggest aloud that BB10 phones weren't going to crush the iPhone out of existence by virtue of their sheer awesomeness? Two words for you, pal: Naughty List.
    21 Dec 2013, 01:41 PM Reply Like
  • Christopher Wallace
    , contributor
    Comments (1253) | Send Message
    In 2013 BBRY was a stock to be shorted. In 2014 it is probably a stock to be traded. If Chen can deliver then perhaps 2015 will the year that BBRY becomes a stock to be bought.
    21 Dec 2013, 01:43 PM Reply Like
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