BlackBerry (BBRY): Is This A Good Investment?

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BlackBerry Limited (NASDAQ: BBRY)

With the ever-increasing popularity of Apple’s iPhones and smartphones with Android or Windows OS, companies strive to continue with technology innovations that would improve users’ experience. On the other hand, BlackBerry couldn’t catch up with its competition which directly affected its earnings and stock values.

The company released results of second quarter’s earnings on Friday (September 25th). BBRY reported a net loss of 13 cents per share on revenue of $491 million for the second quarter. The negative reports directly affected the value of BlackBerry’s stock which was down by 4.78% to $6.18 in early afternoon trading on Monday.

The earnings report only showed what all experts already suspected; the company continues to incur losses and poor sales. For example, in the recently concluded quarter BBRY sold only 800,000 smartphones which is a significant decrease comparing to 2.4 million sold gadgets in the same timeframe last year.

Comparing to the same quarter in 2014, BlackBerry witnessed a 46.5% drop in revenues and, according to analysts, the main culprit for the bad sales and low value of shares is lack of popular operating platforms that most other phones on the market have. BlackBerry’s CEO announced the release of a new phone with Android OS, but it might be too late to prevent the constant fall of stock according to experts.

On the other hand, BBRY is gradually moving its focus onto software. In turn, the company is constantly utilizing cash reserves to acquire companies such as AtHoc and they also plan to buy mobile security firm Good Technologies LTD. Acquisitions like these only contribute to the instability of BBRY and add to their decline mostly because these moves make dents in the company’s cash position and lead to severe integration risks.

The Toronto-based company’s stock has fallen dramatically since closing at an all-time-high of $145.76 in 2008, but it has managed to stick around on the market so long due to acquiring small competitors or selling its licenses. However, analysts suggest bad times will continue for BlackBerry.

The company is driven by more weaknesses than strengths. These weaknesses have a greater impact on the value of BBRY and make it more difficult for investors to achieve positive results. The company’s weaknesses can be seen in different areas, such as:

  • Weak operating cash flow,

  • Inability to catch up with competition, and

  • Disappointing overall historical performance in the stock market.

Due to the reasons listed above, the generally insecure business of the company, and the constant fall in earnings, financial and stock market analysts recommend that investors sell their shares.

The future doesn’t look very bright for BlackBerry. Credit Suisse sees the company faced with difficult transition on multiple fronts and doubts its ability to integrate the acquisitions it makes and ramp up the software business successfully.

Although BlackBerry’s aggressiveness in acquisition of smaller businesses keeps increasing, the reason for lack of trust in the company’s ability to overcome the crisis successfully are very low sales of their handsets. Sustained profitability is predicated on successful sales which, in this moment, seem out of reach for Blackberry.

[Image Courtesy of Forbes]

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