Blackberry Limited (BBRY): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
BlackBerry reported mixed first-quarter 2014 financial results with the top line surpassing the Zacks Consensus Estimate but the bottom line missing the same. Declining smartphone sales, stiff competition from handset manufacturers, escalating marketing expenses and operating platform will continue to act as headwinds for the company. However, a healthy balance sheet, an extensive patent portfolio, launch of the BES12 platform, partnership with Foxcon, a new deal with Amazon.com and presence in over 147 countries are likely to foster growth while moving ahead. Moreover, implementation of cost control measures, divestiture of unprofitable units and capital spending reduction will not only drive margins but will also boost cash flow going forward. Hence, we maintain our Neutral recommendation on the company.

Overview:

BlackBerry Limited (BBRY), headquartered in Waterloo, Ontario (Canada), designs, manufactures, and sells wireless solutions to the mobile communications market. Through the development and integration of hardware, software, and services, BlackBerry provides solutions for seamless access to time-sensitive information, including e-mail, messaging, as well as Internet and Intranet-based applications. The company's offerings also enable third-party developers and manufacturers to enhance their products and services with proprietary wireless connections. BlackBerry's product portfolio includes the BlackBerry line of wireless email devices, embedded radio modems and software development tools.

The company reports in three business segments as follows:

Hardware: This segment offers a wide range of BackBerry smartphones. These are communication tools that use wireless, push-based technology to deliver both business and consumer applications to mobile users. The segment accounted for 60% of the total revenue in fiscal 2013.

Services: This segment is related to the monthly access billing charges to the company's carrier partners, based on BlackBerry's subscriber account base. BlackBerry's service revenues are generated by charging a monthly infrastructure access fee to a carrier or reseller, who in turn, bills the end customer. The segment generated around 35% of the total revenue in fiscal 2013.

Software and Other: Software revenues include fees from licensed BlackBerry Enterprise Server software and BlackBerry Client Access Licenses, BlackBerry Solution Services and upgrades. In addition, this segment also generates revenues from both BlackBerry Professional Software and BlackBerry mobile-voice services. Other revenues are generated from BlackBerry technical support services, non-warranty repairs and maintenance program, and some non-recurring engineering revenues based on the completion of specific contracts. The segment generated around 5% of the total revenue in fiscal 2013.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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