Yesterday BlackBerry (BBRY) spiked for no apparent reason. Everyone was trying to figure out what the catalyst was, but I did not see any reasonable explanation. That does not mean there was none, just that it was not apparent.
Briefing.com noted "continued strength in Q10 sales speculation", and CNBC speculated that the arrival of the new Z10 might have something to do with the rally, as well as the big short interest in the stock. Even Barron's, which usually has a good explanation for stock spikes, had no tangible explanation. Then there was a photo of a new BlackBerry concept phone, the Z15, something between a Z10 and Q10, but again nothing official from BlackBerry itself.
While I will explain further down why I think BlackBerry rallied, BlackBerry is dirt cheap on a P/B and Price/Sales ratio basis. As such, it really doesn't need much of a reason or catalyst to rally. It can, and will rally from time to time, for no reason at all. Yes BlackBerry is currently not making any real money, but neither do many other stocks that are ridiculously expensive these days, but still manage to close at record high levels (a short list of these stocks in this article here).
In my opinion, the culprit of yesterday's rally was the news that Samsung (OTC:SSNLF) announced that BBM (BlackBerry Messenger) will soon be available via Google Play and the Samsung App store for customers across Africa.
Samsung to offer BBM in Samsung App store for all GALAXY Smartphone devices
5th August, 2013 - Today, Samsung has announced that the upcoming BBM™ app will be available in the Google Play and the Samsung App store soon and available to all Samsung GALAXY smartphone consumers across Africa.
Says George Ferreira, VP and COO of Samsung Electronics Africa: "At Samsung we are all about collaboration, innovation and driving consumer experience based on choice, value and customization to suit every lifestyle. As such, bringing a top tier messaging service such as BBM is another way that we are expanding the catalogue of our messaging services and offering customers an amazing way to stay instantly connected with colleagues, friends and family."
BBM will form part of Samsung Messaging Hub as a complementary addition to the current slate of propriety and third party messaging services that Samsung customers enjoy - all aimed at empowering consumers to connect with each other in better ways using text messaging. Offering BBM on GALAXY smartphones in Africa will give Samsung customers access to the BBM social network, including BBM chats, multi-person chats and BBM Groups, which allows BBM customers to create groups of up to 30 people, as well as the ability to share photos and voice notes.
The question is, why Africa? Well if you remember my previous post on the subject, BlackBerry is not just the coolest brand in South Africa, it also commands about 50% of the smartphone market. Yes Android will probably be catching up, however please note that all these people have been accustomed to using BBM for their basic communication needs for many years now. So if all of a sudden Samsung tells them that they can continue to do so, even if they own a Samsung Android device, then they will continue to communicate as before, even if they might not own a BlackBerry device anymore.
Second, BlackBerry does not currently offer any low-end smartphone devices. Even the lower-priced Q5 is not priced that low to become very popular in South Africa or many other markets in Africa. So assuming that people at the low end start buying Android devices in the future, why not buy a Samsung device that will fully and officially support BBM? I think Samsung is making a very smart move here. Because while BlackBerry currently does not have a device in the $100-$200 range, Samsung does.
Something else to keep in mind, is that this might be the begging of some kind of collaboration between Samsung and BlackBerry. We know for some time now that BlackBerry has not ruled out licensing its BB10 OS. Also, please read my two previous articles on the smartphone operating system wars (here and here) that are ongoing.
One way for Samsung to reduce its reliance on Google's (NASDAQ:GOOG) Android OS is to make phones for other ecosystems. Obviously Tizen will be Samsung's first choice if it ever devices to part from the Android OS, but if it has the option to also make phones for BB10, why not do it? Remember, it will basically have no competition for BB10 devices in the $100-$200 range, because it will be the only one making them. And since there are hundreds of millions of users all over the world (Indonesia for example is another big market for BlackBerry), it will basically have a ready clientele at the low end of the BB10 spectrum. And while Samsung will gain making hardware sales, BlackBerry will make money in licensing.
BlackBerry also stands to gain because its ecosystems will expand. Having a partner in the lower-priced smartphone spectrum will at least preserve its ecosystem and prevent Google from concurring the world. And the possibility of BBM one day rivaling other communication programs like WhatsUp, Viber and even Skype, is something that will definitely add value to BlackBerry any way one does the math.
The bottom line is that while BlackBerry is cheap enough to rally by itself, the Samsung announcement is probably the culprit for yesterday's rally, with the help of some short covering of course.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.