Seeking Alpha

BlackBerry's (BBRY -1.1%) FQ4 gross margin improvement is sustainable, argues Morgan Stanley's...

BlackBerry's (BBRY -1.1%) FQ4 gross margin improvement is sustainable, argues Morgan Stanley's Ehud Gelblum after reviewing the company's 40-F. Gelblum, who upgraded BlackBerry ahead of its FQ4 report, notes 460 bps of the FQ4 improvement came from lower license amortization, which he thinks is the result of more favorable deals with suppliers. Meanwhile, the fact the 40-F indicates license amortization will average $300M/quarter in FY14 (up from $202M in FQ4) leads Gelblum to think BlackBerry expects its unit shipments to average 10M/quarter, up from FQ4's 6M.
Comments (21)
  • oldtimer125
    , contributor
    Comments (127) | Send Message
     
    If anything close to 10 million units/quarter are confirmed on the next quarterly report, it should result in some very big upgrades and large increases in analysts' model prices.
    10 Apr 2013, 07:26 PM Reply Like
  • Infinity Group
    , contributor
    Comments (550) | Send Message
     
    10 is my new lucky number!
    10 Apr 2013, 07:28 PM Reply Like
  • Stock Market Mike
    , contributor
    Comments (2041) | Send Message
     
    Can you imagine 10 million/qtr with the ASP of these new BB10 devices? That's a lot of profit.

     

    $54/share, here we come!
    10 Apr 2013, 08:36 PM Reply Like
  • Yasch22
    , contributor
    Comments (309) | Send Message
     
    Exactly. 10m units split evenly between BB7 (5m X $200 = $1 billion revenue) and BB10 (5m X $500 = $2.5 billion revenue). Margins of 40% on BB10 = $1 billion in earnings. Subtract an addition $100m in intangible amortization and an additional $118m in advertising (or 50% greater than the $235m spent in Q4, as Heins & Bidulka mentioned during the conference call). Finally, let's assume (liberally) a drop of $80m from the "Software & Services" line of revenue, due to further loss of subscription revenue, although we should bear in mind that addtitional revenue should soon begin accelerating from adoption of BES10 in the enterprise. Basically, sales of 5m BB10 devices will mean earnings of $700m, or approximately $1.15 per share. In my view, Heins & Bidulka were being egregiously conservative when they guided BB to a break-even Q1 for earnings per share.
    11 Apr 2013, 04:12 AM Reply Like
  • Stock Market Mike
    , contributor
    Comments (2041) | Send Message
     
    To be fair, their guide may not be that conservative if they have to flood the channel with BB10 devices. Does anyone know the amount of time for a freshly manufactured BB10 device to reach a consumer's hands? I'm assuming it's around a month, which means they have to foot the bill on 3.3m Blackberries before getting paid?

     

    Then again, with the number of preorders and large orders coming in, they do seem to be getting paid up front. I just hope they can ramp up capacity adequately!
    11 Apr 2013, 11:19 AM Reply Like
  • gwynfryn
    , contributor
    Comments (4029) | Send Message
     
    Stock, don't those who preorder have to put some money up-front?
    12 Apr 2013, 08:57 AM Reply Like
  • Sophikal
    , contributor
    Comment (1) | Send Message
     
    Thank you for asking.
    My comment is from experience. No, not like an analyst. I experienced the love affair that people had with their favorite new toy, the never to be forgotten "Blackberry." Now they have the chance to have it back. What would you do? Buy,buy, and buy some more of Blackberry's stock.
    Mary
    10 Apr 2013, 08:58 PM Reply Like
  • slcUTAH
    , contributor
    Comments (519) | Send Message
     
    10 million phones per quarter doesn't appear too optimistic. Breaking this figure down it's 3.333 million units per month sold globally but will the upcoming Samsung/Apple phone price wars in many parts of the world affect the 10 million/quarter estimate? Blackberry needs to bring their lower priced phones to market ASAP.
    10 Apr 2013, 08:59 PM Reply Like
  • alext1379
    , contributor
    Comments (706) | Send Message
     
    BlackBerry doesn't need to sell as many phones as Apple or Samesung to be profitable.

     

    The only people who seem to have an issue with BlackBerry aiming for 3rd place are the ones shorting BB and seeing that they guessed wrong.
    11 Apr 2013, 09:08 AM Reply Like
  • Gary Bowering
    , contributor
    Comments (4) | Send Message
     
    Well said!
    10 Apr 2013, 08:59 PM Reply Like
  • MC12345
    , contributor
    Comments (18) | Send Message
     
    i'm having a hard time recalling my advanced calculus class but 10MM/q > 6MM/q ? not an insignificant per quarter. Which amounts to 24MM more units sold for the year. What are the margins and the resulting increases to revenue and eps? I would think significant ?...
    10 Apr 2013, 09:04 PM Reply Like
  • Stock Market Mike
    , contributor
    Comments (2041) | Send Message
     
    Wouldn't that be 16m more units? There's 4 quarters in a year. Still a huge amount, and something to look forward to.
    11 Apr 2013, 11:20 AM Reply Like
  • Michael Blair
    , contributor
    Comments (4579) | Send Message
     
    Even as late as one or two quarters ago Blackberry was selling 8 million or more BB7 devices, despite having announced BB10 was coming. Last quarter they sold over 5 million of the older models.

     

    10 million BB10 models does not seem an unreasonable target, not necessarily in the current quarter given the Q10 is yet to be released, but in subsequent quarters the device could turn in some volume. I believe Blackberry will be releasing a number of other, lower priced models during the year.

     

    10 million does not seem out of reach, and, if it materialized, would give some upward momentum to the stock.

     

    I think I will buy both a Q10 and a Nokia Windows 8 smartphone, and see which one I really like, then compare it to the Samsung and Iphone models soon to be released and which members of my family anxiously await.

     

    I will report back on the results of my non-random sample of one within a few weeks, biased of course by my current devotion to my Blackberry bold which continues to serve me well.
    10 Apr 2013, 09:48 PM Reply Like
  • Gtg007
    , contributor
    Comments (71) | Send Message
     
    When will Blackberry report their next earnings?
    10 Apr 2013, 11:31 PM Reply Like
  • Yasch22
    , contributor
    Comments (309) | Send Message
     
    June 28. Q1 ends June 1, & the report comes out Fri. June 28.
    11 Apr 2013, 12:07 AM Reply Like
  • gwynfryn
    , contributor
    Comments (4029) | Send Message
     
    Be cautious guys; 10M/quarter is not an impossible figure, but it's not very likely either, so bear in mind that it's just a projection, and based on rather narrow criteria, at that. Still it looks like it's going in the right direction, so I expect the true figure will be significantly greater than 6M, but probably not more than 8M.
    11 Apr 2013, 08:13 AM Reply Like
  • alext1379
    , contributor
    Comments (706) | Send Message
     
    If you follow the NASDAQ short interest, since October, the short interest has doubled, with 2 large jumps at approx the $9.50 and $12 price level. Even if they were all shorted at $12, that means there are approx 80 million shares that are 20% in the red right now, its even worse for people who shorted at the $9.50 and $7 levels. You can see now why there's so much fear of BlackBerry's success, or even the status quo. Good luck justifying to your investors an ROI of -20% or more.
    11 Apr 2013, 09:18 AM Reply Like
  • sailpgd
    , contributor
    Comments (80) | Send Message
     
    What explains the move to the downside this morning by almost 5%? Do just have to do with Amazon dropping the price of the Z10 to $99
    11 Apr 2013, 09:42 AM Reply Like
  • slcUTAH
    , contributor
    Comments (519) | Send Message
     
    Hi sailpgd,

     

    I would guess yes that the Amazon price drop has something to do with today's drop and perhaps the news that "many" Z10s are being returned. You may have read this already:

     

    http://seekingalpha.co...
    11 Apr 2013, 10:54 AM Reply Like
  • jack434
    , contributor
    Comments (43) | Send Message
     
    The apparent answer to your query:
    "Several U.S. retailers have seen a pickup in Z10 returns, says Detwiler Fenton in a note that could be pressuring BlackBerry (BBRY -5.2%). Detwiler, which also issued a downbeat note on Z10 demand last month, adds the pace of returns in some cases is exceeding the pace of sales, and that users are complaining about the Z10's UI, Maps app, and app availability. Separately, Amazon has cut its subsidized Z10 price to $99. (AT&T launch)"
    Ref: http://seekingalpha.co...
    11 Apr 2013, 12:27 PM Reply Like
  • alext1379
    , contributor
    Comments (706) | Send Message
     
    Beauty, shares have dropped over $1, time to buy on the cheap (relatively speaking).
    11 Apr 2013, 02:32 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|