BlackBerry Q4 – Last lap?

Q4 gives no reason to hope.

• BlackBerry reported disappointing results as the two most important metrics of a company in trouble (revenue and cash flow) were very weak.
• Q4 revenues / EPS were $977m / LOSS $0.06 compared to expectations of $1.11bn / LOSS $0.57.
• $553m of cash was consumed during the quarter giving the company just over a year should cash consumption continue at this rate.
• The good news is that John Chen is living up to his reputation and is tightly controlling the metrics that he can.
• OPEX is already meaningfully down and inventory has been reduced by one third.
• However, at the same time the things that he can’t control are likely to mean that BlackBerry has no real future.
• BlackBerry devices and services are horribly out of date and have very little appeal to users.
• The new releases are unlikely to change that appeal much as the focus appears to be backward-looking rather than forward.
• Devices such as the Classic may help margins as it is being designed on the basis of the components that the company has lying around in inventory.
• However, this will provide only a temporary respite as when the inventory is cleaned up, BlackBerry will be once again exposed to full market pricing for components.
• Rivals such as Microsoft, AirWatch, Good and MobileIron have decent device management solutions that cover all platforms.
• These companies are making strides with their security credentials and even BlackBerry’s most august customer, The White House, is trialling other solutions.
• BB12 offers full backward compatibility which is excellent, but the subscriber base is already below 60m and falling fast.
• It will be another 8 months before this is ready for roll-out by which time another 20m subscribers will be have deserted the platform.
• The problem remains unchanged in the there is no room left for BlackBerry.
• It has chosen to vacate the consumer market and in the enterprise its rivals have caught up and are now on a much sounder financial footing.
• The only asset it has left is the installed base and this is evaporating fast.
• I continue to believe the only real future for BlackBerry is a break-up and this values the shares at around $4.
• Those still hanging on should head for the exit now.