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  • Humor: A Possible Storyline For A Blackberry Advertisement...

    Blackberry needs to come out with a hitting advertisement - while I was watching the video blog on n4bb.com/n4bb-live-bbm-cross-platform-bl.../

    The folks on that video blog were talking about how Blackberry needs to do something to spread the word; suddenly, this is what came to my mind...

    "Hey! I am an 'Anal'yst and this is my dear cussin - Media... we both do a fantastic job at destroying shareholder value - oh by the way, as you know - we are currently trying to destroy Blackberry - and what a fun, fun job it has been...

    ah, well, well, cussin are we not diabolically cruel (like those service providers) to go out and trash Blackberry while we ourselves cannot do without their devices in our daily lives (introspect for a while) I guess the truth shall remain buried forever..."

    and close the ad by saying: The Media closes the ad by saying:

    Cussin, if I really could say how Blackberry helps you in your job - I would have written:

    "Z10/Q10 - a lasting investment, without the risk..."

    The 'Anal'yst says:

    Cussin, I can honestly say: "You Z'ed it!" (rhyming with "You said it!")

    Disclosure: I am long BBRY.

    Tags: BBRY
    Sep 06 2:02 AM | Link | Comment!
  • Blackberry - Is Current Perception A Reality?

    Note: I am by no means a financial expert or claim any sound understanding of finance; and, given a chance, I would like to understand the nuances from the knowledgeable folks here on SA.

    After looking through the current Q1 2014 financial statement it appears that Blackberry's next quarter should have a revenue in the range of $3.8 to $4.5 billion. This is solely based on hardware inventory levels and the numbers could vary on top of this based on BES 10 sales - which I don't think will kick in that much in this quarter. I am basing this on the on going correlation between levels of inventory it has been holding in prior 2 quarters and the revenue number it hit in the following quarter which is ~5 times - the inventory levels have almost doubled in this quarter relative to that in Dec. of 2012 - should we consider this to be a good indicator? Bears may pounce on this but I would caution you that over last 2 quarters (since BB10 was introduced) the inventory levels have increased in tandem with a corresponding ~5 folds increase in revenue so there seems to be some correlation that seems to be playing out.

    Since the recent Q1 2014 results there has been a lot of talk about lack of transparency on the part of Blackberry. I won't cover the business side (covering marketing and advertising, new product launches, price/promotions, etc.) but only limit my discussion to the current financial statement and what I can read and infer based on a layman's understanding of a financial statement and all the things that we have all heard and read about in the print.

    I am using the following link as reference: online.wsj.com/article/PR-CO-20130628-905210.html

    or you can also check it here: www.google.com/finance?q=NASDAQ%3ABBRY&a...;ei=3CjsUbDUMsSerAHZzAE

    The numbers are a comparison between this and the last quarter - I want to show that even though, overall, Blackberry's business has improved - quarter over quarter - the stock got unduly punished.

    These numbers are a comparison between June 1 and March 2 2013. All numbers are in millions of dollars (US)

    On the Assets side:

    Inventories:

    June: $887 - March: $603

    Increased by +284 million (per some comments on SA this is not due to finished goods but for work in progress items) - I think somebody estimated this to be ~1 million unit equivalent.

    Cash and cash equivalents:

    June: $1591 - March: $1549

    Increase by +$42 million from last quarter.

    short term and long term investments:

    ST - June: $1233 - March: $1105

    LT - June: $247- March: $221

    Increased by (NYSE:ST) $128 million, (LT) $26 million = $154 million - can somebody please explain this - Isn't this good?

    Accounts Receivable, Net and Other receivable:

    AR - June: $2536 - March: $2353

    OR - June: $265 - March: $272

    Overall an increase of $126 million increase - does this mean Blackberry is going easy on collection? I will compare this number with payments outstanding to its partners (which is a liability on its books) - a lot of analyst mentioned that Blackberry was sugar coating its books by deferring payments to the parts manufactures. Let see later if that is indeed true.

    Income taxes receivable, Other current assets, Asset held for sale, Deferred Income tax asset:

    IT - June: $33 - March: $597

    OCA - June: $340 - March: $469 (reduced by $129 million)

    DITA - June: $127 - March: $139 (reduced by $11 million)

    AHS - June: $105 - March: $106 (reduced by $1 million)

    In the March quarter - blackberry made a profit entirely based on the rebate it received based on Income taxes receivable. As you will see later, Blackberry received substantially let in this quarter.

    Intangible assets, Property, Plant and Equipment:

    IA - June: $3513 - March: $3448

    PPE - June: $2200 - March: $2303

    IA went up by $15 million while PPE dropped by $103 - is the PPE drop due to drop in PPE value or did they liquidate PPE to that amount? Will that show up under accounts receivable? (which currently stands at $133 million).

    Per some folks on SA they either discount the entire IA or value them at 50%. I have read folks discounting PPE at 75%. I can't really comment on this. If IA does include patents then according to Francis Chou (a Guru Investor) he valuates Blackberry's patents at $11+.

    Now lets look at the Liabilities:

    Accounts Payable, Accrued Liabilities and Deferred Revenue:

    AP - June: $1169 - March: $1064 (increased by $105 million)

    AL - June: $1921 - March: $1842 (increased by $79 million)

    DR - June: $346 - March: $542

    Per Wikipedia, Deferred Revenue is the money received for goods and services that haven't as yet been delivered - is this related to the 1 million device order? If so, is it fair to say that the Average Sales Price (NYSE:ASP) is $542 on each BB10 device? and it also means that Blackberry has delivered $196 million of BB10 devices in this quarter here in US. Second, does it also not mean that the DR of $346 million is be offset/covered by the increase in the inventory of $284 million this quarter - which means that we can expect to see a sale of about ~500k Blackberry devices either in the next quarter or spread over next two quarters at an average ASP of $542 per BB10 device. To me, it actually means that Blackberry has shrewdly engineered deals and is managing its inventory levels and also has about $346 million on its Liability side of the books which will go towards revenue in the coming quarter or quarters. I think it will be prudent to see how this DR shapes up in the coming quarter. More importantly to me it means that at an ASP of $542 per BB10 device - Blackberry delivered ~360k BB10 devices (by dividing $196 million by the ASP of $542) this quarter toward this particular DR (entirely attributable to order from Verizon, US?).

    As far as AP and AL goes (and if you offset these amounts with Accounts Receivable (NYSE:AR) and Other Receivable OR above) - you can clearly see that Blackberry is offsetting what it is still waiting to receive with what it owes (in fact, it has also offset the Venezuela effect with the AL entry of 79 million). Net/Net it has more to receive than what it effectively owes. So in short, I guess this is what the analyst mean when they say Blackberry is making its books look good by pushing out the payments on its partners - in fact, I see this as shrewd financial engineering on part of Blackberry. This also helps explain how the cash can increase when on the books Blackberry is still showing a loss! In a way, by showing a loss Blackberry is also getting a break from the Canadian Government on taxes. Please correct me if I am wrong on this line item.

    There are other lines items that also of interest:

    Revenue, Cost Of Sales, Gross Margins

    REV - June: $3071 - March: $2678

    COS - June: $2029 - March: $1603

    GM - June: $1042 - March: $1075

    Revenue increased by $393 million and COS increased by $400 million. Revenue increase was offset by COS - does this mean that Blackberry had to increase promotional activity in order to sell its devices? This resulted in the drop in margins from 40.1% to 33.9%.

    Operating Expenses:

    Research and Development, SG&A

    R&D - June: $358 - March: $383

    SG&A - June: $673 - March: $523

    I think Canadian taxes give a break on R&D expenses (it has dropped by 25 million in this quarter). SG&A jumped by $150 million.

    Operating Loss, Investment Income, Recovered Income Tax:

    OL - June: $(169) - March: $(12)

    II - June: $5 - March: $(6)

    RIT - June: $(80) - March: $94

    We saw that through a combination of Accounts Payable and Accrued Liabilities Blackberry has offset a lot of OL and in return for this OL it also got a break on taxes due. Coupled with an increase in SG&A of $150 million, there was also a one time licensing fee which accounted for $155 million - I don't know where that line item rolled into - is it part of COS? Second, the Venezuela effect has accounted for $72 million. If we add all this up it totals up to $377 million.

    Disclosure: I am long BBRY.

    Additional disclosure: I am not a financial expert or do not make any claims of being able to read financial statements. This is my first attempt at dissecting $BBRY's financial statement and making some educated inferences.

    Tags: BBRY
    Jul 21 2:51 PM | Link | 9 Comments
  • Why I Have Turned Bullish On $RIMM...

    I had bought Blackberry Playbook along with my Lumia 900 around July/August 2012 and back then I wasn't aware that Blackberry had a plan to release BB10 platform - how ignorant of me. What I was most impressed about the Playbook was its front and back 1080 camera and mini HDMI port along with their QNX operating system and BBM. I have worked in the past with real-time OS'es and had also implemented one myself (the one I wrote was good enough to run cruise control and other apps in a car with limited compute and memory resources) and I had studied early incarnation of QNX back then and was thoroughly impressed.

    Around that time I was pretty impressed with my Lumia 900 and so I did a lot of technical due diligence on Windows Phone 8 platform and Nokia's differentiation at the level of hardware, application and eco-system and came out pretty impressed with what Microsoft and Nokia had done. Unfortunately because I wasn't aware about Blackberry's BB10 phone I didn't buy Blackberry when their stock was at $5.80. My only grip about Blackberry Playbook was that at that time I couldn't install and run Android applications (that support came later in the OS 2 release) - apparently BB10 now allows one to run Android applications (although my initial take away was that they were a bit slow). I also had found that their internet browser was slow as well. I did write about this on my earlier post. Over last two days I have seen all the latest demo videos out there and it has blown my mind on what BB10 provides as a platform.

    As far as $RIMM goes I think they have truly carried forward the idea of Microsoft's Windows 8 Live Titles to a new level and have not only neatly integrated the Live Tiles UI with their Messaging Hub (BBM) but, have also truly changed the playing field in terms of application level integration.

    Microsoft and Nokia have also achieved application level integration in the current Windows 8 platform but is currently limited to certain specific applications (e.g. look at Camera and the extensions that you can drop into it).

    The differentiator as far as the BB10 platform goes is that they have integrated cross cutting features as "aspects" and make them available to any application (and these can be pulled in seamlessly with simple finger gestures).

    Apart from some of the features like peek, flow, cascade, etc. they also seamlessly integrate all forms of messages (emails, tweets, etc.) as incoming events - which to me is a key differentiator over and above their secure email exchange. Microsoft/Nokia also supports this capability but as far as I know it is not bubbled up as transparently as on finds in the BB10 platform.

    Last but not the least they provide means to run Android applications - I think this will be a key driver that will drive $RIMM sales and take a bite out of Samsung revenue. It won't be too far fetched to say that in the next few months BB10 will be to Android what Usain Bolt is to Sprint. If that was not all, they have made their entire platform open - which means a lot of school/college kids and hackers will also be gravitating towards it.

    On the financial side, $RIMM has >$2B cash in hand and their market cap is 6B which means market is really valuing them at less than $4B - which is a 30% discount on $RIMM's current stock price!

    IMO, BB10 doesn't necessarily have to be blockbuster for the stock to move higher (and that is why I took a long position in $RIMM at $11.98). With no debt on their books, I don't believe that $RIMM is going bankrupt; and, since their stocks outstanding (float) is comparatively small ~500M coupled with the fact that 65% of that is held by financial institutions and the short interest is ~30% - I think there is a very high possibility of a true short squeeze occurring on $RIMM's stock.

    All in all, I am thoroughly impressed by the work that both $RIMM, $MSFT and $NOK have done to build an eco-system that can stand on its own and truly compete with the likes of $APPL, and Samsung. I am personally convinced that together $RIMM and $NOK will take a sizeable bite out of the share of Samsung (and to a much lesser extent Apple). Last but not the least I am also of the opinion that BB10 very likely will use $NOK maps.

    I am long $NOK and now $RIMM.

    Disclosure: I am long RIMM, NOK, MSFT.

    Tags: BBRY, NOK, MSFT, Technology
    Jan 06 12:57 AM | Link | Comment!
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