As of Oct 9, we maintain our Neutral recommendation on
) despite the dismal results posted by the company. Both the top
and the bottom line lagged the Zacks Consensus Estimate in the
recently concluded second quarter of fiscal 2014.
BlackBerry 10 (BB10)-based Z10 smartphone is now available in 147
countries. BB10 QWERTY devices are currently accepted by over 320
telecom carriers across the globe. The Q10 smartphone is
available in 96 countries and will be launched in another 50
countries in the upcoming quarters.
A major growth product for BlackBerry is its BlackBerry
Enterprise Service 10 (BES10) solution which is being used by
more than 18,000 enterprises. This flexible, scalable, high
security and cost-effective cross-platform product is
interoperable with Apple's iOS and Google's Android.
By offering a convenient, reliable and secure way of accessing
email in real time, BlackBerry has been able to successfully
differentiate its BlackBerry products from the other offerings in
the communications market. BlackBerry commands a strong brand
value in the wireless market, leveraging the popularity of its
push email system.
BlackBerry holds 2,033 patents, ranging from mobile security
to push e-mail in high-end smartphones. Moreover, a strong cash
position and a debt-free balance sheet will tend to act as
tailwinds for the company going forward.
On the downside, we remain concerned about the company's recent
decision to change the business model of its high-margin services
fees segment. As per the new structure, the company will benefit
from subscribers who opt for services like greater security while
the other customers will generate little or no service revenue
for the company.
Furthermore, BlackBerry is facing stiff competition from low-cost
smartphone manufacturers, which we believe will continue to hurt
profitability going forward.
Meanwhile, BlackBerry has decided to divest its entire stake to a
consortium headed by Toronto-based insurance company Fairfax
Financial Holdings Limited for $4.7 billion or $9 per share. Both
Fairfax and BlackBerry have been offered a six-week due diligence
period before the transaction can be completed.
During this period, BlackBerry can explore better bids.
However, if BlackBerry exits the deal, it will have to pay nearly
$155 million to Fairfax but if Fairfax reduces its offer below $9
without BlackBerry's approval then the company will be spared the
$155 million fine. However, after the definitive agreement is
signed, the termination charge may scale up to 50 cents per
BLACKBERRY LTD (BBRY): Free Stock Analysis
NOKIA CP-ADR A (NOK): Free Stock Analysis
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
To read this article on Zacks.com click here.
Currently, BlackBerry has a Zacks Rank #3 (Hold).
Other Stocks to Consider
Other stocks in the telecom industry include
). Both Nokia and AT&T currently have a Zacks Rank #3 (Hold)
while Verizon has a Zacks Rank #2 (Buy).