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

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Summary:
We maintain our Neutral recommendation on BlackBerry Ltd. Owing to disappointing third-quarter 2014 financial results with the top and the bottom line lagging the Zacks Consensus Estimate. Declining smartphone sales, stiff competition from handset manufacturers, escalating marketing expenses and lukewarm response for the new BB10 operating platform will continue to act as headwinds for the company. Meanwhile, the uncertainties surrounding the company's plan to go private may lead to more restructuring and divestiture in the forthcoming quarters. Further, a healthy balance sheet, a huge patent portfolio and presence in more than 147 countries may act as tailwinds for the company, moving ahead. We also believe that BlackBerry is fairly valued at current levels.

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 consist of 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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