After The Dust Settles On BlackBerry, What Do You Really Have Left?

| About: BlackBerry Ltd. (BB)
This article is now exclusive for PRO subscribers.

As reported, BlackBerry (BBRY) dropped the bomb on its losses for the quarter ending Nov 30. Revenue was down 24% to $1.2 billion. A net loss of $4.4 billion, or $8.37 a share (yes that is billion). Analysts were expecting a quarterly loss of 44 cents a share on $1.59 billion in revenue. Despite the widening losses and underperforming results, the company's stock price pushed upwards of 15% after the earnings call, seemingly on the turnaround strategy or perhaps market movers at play.

Yes, there were one-time accounting write downs as is common with a clean sweep approach by the current management group. Yes, a new executive group led by John Chen, (his first quarter with the company) is present, and yes, of course they have a turnaround plan that they solidly believe in. Often mentioned in the possible obit section, often the would-be acquired column, BlackBerry is still hanging on, still attempting to capitalize on its brand, on its solid product of the past, on its base of users (reportedly 40 million). But to what end? It is notable that there was a steep decline of sales of BB10 smartphones (about 1.9 million BlackBerry handsets during the quarter, approx. 72% fewer than a year earlier period). The company has cut its future smartphone portfolio down from 6 to 4 devices also.

Its cash burn did show some signs of improvement ($377 million, as opposed to $500 million burned last quarter). But the current management group's plans are tough to get excited about or to think that there is a long-term future with this company's products, and even more so, to believe they represent solution. Essentially those plans seem to be: outsource consumer product development, reduce costs and liability with inventory, and focus on high end, govt., and software services). Granted, when you start a conversation with ,"In the last 90 days, I've lost $4.4 billion, experienced a revenue drop of 24%, but it didn't take me all of the $500 million I burned last quarter to do so," it's a hard sell. You could confuse those results with a U.S. Postal Service financial disclosure.

Referencing its plans, the company disclosed a 5-year deal with Foxconn (OTC:FXCOF), intended to market phones to emerging foreign markets, such as Indonesia. Wow, that sounds exciting! It will be interesting to see what that does to profit margins on each unit. The move does enable BlackBerry to reduce fixed costs, more easily control its inventory (less of write-down risk), while it concentrates on its end-to-end enterprise security and BBM software solutions and services.

Using its beneficial trait of being able to be highly secured (the U.S. president is allowed to use a BlackBerry but not an iPhone (NASDAQ:AAPL)) the company plans to market to high end government agency types that need extremely secure phones. This is somewhat a concession that it cannot adequately compete with Android (NASDAQ:GOOG) and iPhones. However, a positive note is that the company is deeply rooted in governmental agencies -- agencies that change does not come easily to, especially secure device use. Transitioning to a new device and company would not be welcome. Another plan consists of selling from the bottom up, aka super cheap phones flooding the market. Look for future BlackBerry units to be designed by Foxconn also, a move perhaps to reduce R&D spending.

Mr. Chen articulated the following:

With the operational and organizational changes we have announced, BlackBerry has established a clear roadmap that will allow it to target a return to improved financial performance in the coming year. While our Enterprise Services, Messaging and QNX Embedded businesses are already well-positioned to compete in their markets, the most immediate challenge for the Company is how to transition the Devices operations to a more profitable business model.

With its stock quite volatile, and current investors holding their breath, can an investment be made here that provides any type of return? Long seems like a blue sky dream unless you hope for a further clotting of cash burn and halt of big losses, and an eventual acquisition by someone like AT&T (NYSE:T) or Verizon (NYSE:VZ) that can monetize 40 million users with something else or perhaps a partnership with Foxconn. Likely it will not be a device maker but likely a bandwidth or voice plan supplier. Who wouldn't want 40 million users to sell something else to?

The short term road seems more likely as riding the news (some positives are likely to emerge) from quarter to quarter combined with a buy low, sell slightly higher plan. It is believable that BlackBerry will be writing down again 3 quarters from now (related to the consumer side of its business) as its unimaginative plan takes hold. Foxconn could be a player at a garage sale and BlackBerry as part of case history of another one-time tech giant gone.

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.