What's Behind the Run At BlackBerry?

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Shares of BlackBerry (BBRY) have been one of the top performers in 2014, gaining 33.2 percent year to date. While BlackBerry has outperformed such industry stalwarts as Apple (AAPL), Google (GOOG), and Microsoft (MSFT), little of that has to do with the fundamentals of the business. Much of the jump in BlackBerry can be traced to hope.

Since CEO John Chen took over for Thorsten Heins late in 2013, investors have seen BlackBerry's prospects as brighter. Chen is a turnaround specialist, having helped turn around Sybase before ultimately selling it to SAP in 2010 for $5.8 billion. Chen has said in the past that he will try to return BlackBerry to dominance, but it's going to be difficult.

Outside of the optimism surrounding Chen, the company has tried to sell itself, and failed, including during effort with its biggest investor, Fairfax Financial Holdings Limited. But that fell through. Fairfax Financial's CEO Prem Watsa, described by many as the "Canadian Warren Buffett," was on BlackBerry's board for much of 2013, but ultimately resigned before the sale announcement. A deal could not get done, but Fairfax did recently up its stake in BlackBerry, and now owns 16.8 percent of the outstanding stock.

Chen has made some organizational improvements since taking over for Heins in November 2013. Soon after becoming CEO, he announced BlackBerry would partner with Foxconn, which already makes Apple devices, to make BlackBerry devices and manage its inventory.

Chen said, “Partnering with Foxconn allows BlackBerry to focus on what we do best – iconic design, world-class security, software development and enterprise mobility management – while simultaneously addressing fast-growing markets leveraging Foxconn’s scale and efficiency that will allow us to compete more effectively.”

Though BlackBerry is nowhere close to the once dominant position in smartphones it once held before the launch of the Apple iPhone, it seems as if for now, BlackBerry's position has stabilized. For the quarter ending Nov. 30, BlackBerry lost $8.37 per share, but on an adjusted basis lost 67 cents per share. That was worse than the 44 cents analysts were expecting, but it seems as if Blackberry's smartphone market share has stopped going down, if only because it can't go much lower.

According to research firm IDC, BlackBerry captured just 0.6 percent of the worldwide smartphone market in the calendar fourth-quarter, as it shipped just 1.7 million smartphones. In the press release, IDC said, "With new leadership, management, and a tighter focus on the enterprise market, BlackBerry may in a better position, but still finds itself having to evangelize the new platform to its user base."

With Chen at the helm and optimism that things can't get much worse at BlackBerry, the talk of messaging apps, and their exceptionally high valuations has investors salivating over Blackberry's messaging platform, BBM.

Though BBM is much smaller than WhatsApp, which Facebook said it was going to acquire for $19 billion in cash and stock, there is promise surrounding it. In May of 2013, BlackBerry announced it would be bringing its popular messaging app to iOS and Android, opening up the platform. BlackBerry recently announced it would be bringing BBM to Windows Phone as well, as it hopes to attract more users than the 85 million it currently has.

Since BlackBerry has brought BBM to iOS and Android, the company has continued to make improvements to the app. It now allows users to make free calls to BBM contacts anywhere in the world using Wi-Fi or data, location sharing, and BBM Channels, which is essentially a new social network within BBM, amid several other new features.

With WhatsApp getting bought for $19 billion, and other messaging apps, such as Line, Kik and others doing exceedingly well, investors have placed their faith on BBM becoming more valuable than it already is, even if Chen recently said, “it is a bit too early to think about getting our $19 billion.”

BlackBerry shareholders have had a lot to be thankful for in 2014, even if much of it is based on hope. Now, it's up to Chen and his executive team to deliver.



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.



This article appears in: News Headlines , Business , Stocks , Technology

Referenced Stocks: BBRY , AAPL , GOOG , MSFT

Chris Ciaccia

Chris Ciaccia

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