BlackBerry (BBRY) has had a rough time in the last several years. In between switching CEOs, a rapidly shifting smartphone market, and most notably rabid investors in both directions, it's amazing that the company managed to swing back to profitability in the first place. BlackBerry now finds itself in a different world; the age of slick-haired businessmen toting BlackBerry phones may be behind us. As Apple's (NASDAQ:AAPL) iPhone and various Google (NASDAQ:GOOG) (NASDAQ:GOOGL) phones have saturated the market, BlackBerry has shifted its business plan and is now looking to move forward and beyond the lukewarm reputation that it has acquired.
The BlackBerry revenue story is well-known amongst telecom investors, but it's worth a recap. Basically, BlackBerry was making great money and then stopped doing that, entirely. See chart:
The revenue began dropping when people realized that BlackBerry phones were outdated and subpar. At that point, the company couldn't move quickly enough to remedy their position, and the result was a massive drop in profits:
BlackBerry bled a lot of money, very quickly, but it managed to recover from it. That's an impressive feat in itself. Former CEO Thorsten Heins wasn't able to do it; he was let go and replaced by John Chen, an ex CEO of an independent software vendor and current director of Wells Fargo (NYSE:WFC) and Walt Disney Company (NYSE:DIS). Chen understands the need for BlackBerry to depart the regular smartphone market and establish a niche for itself. The good news is that BlackBerry isn't soaked with debt, as some people believe. It actually has a solid balance sheet and declining liabilities:
This is the first step to a new BlackBerry. If the company were flooded with debt, it wouldn't be able to pivot and shift its operations to new ventures. As you can see from the chart, BlackBerry has been accruing assets and lowering its liabilities.
Market and Happenings
CEO John Chen has made it clear that he wants BlackBerry to become a different kind of competitor. He knows that he can't wrestle market share away from iPhone or Android users, but he thinks he can do something else. The direction that he seemingly wants to take is one focused on marketing to security-minded professionals: "While we applaud Google and Samsung for their plans, we don't think it's enough for security-minded enterprises," Chen writes. "Instead, look to companies that have literally invested three decades into advancing the twin causes of security and productivity. In other words, don't be dazzled by those who can talk the security talk. Instead, look to the company that has proven repeatedly that it can walk the walk."
Clearly, this man has a lot of confidence in his product. That might just be what it takes for BlackBerry to become respectable again. Keep in mind that they're still profitable, so the need isn't too dire. With recent innovations like a square phone and a 'fact check portal', it's easy to discount what BlackBerry is doing as mere comic relief. This is not the case, however; BlackBerry has proved several times that it has enterprise-level security features.
BlackBerry is trading at a historically low price to earnings ratio, hovering at roughly 4.6. The company has found itself at an inflection point, one that will determine its fate. BlackBerry pulled itself out of severely negative profitability, picked up a new CEO, and found itself a new direction. It seems like a lot is hinged on John Chen, who seems competent and confident in his company's product line. I don't want to say BlackBerry is a buy, but if you believe in John Chen and his idea for BlackBerry inhabiting a security niche, then I would say that it's a good time to enter the stock.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.