On Jul 17, 2014, we issued an updated research report on BlackBerry Limited (BBRY).
BlackBerry has delivered positive earnings surprises in three of the last four quarters, with an average beat of 26.33%. Also, the company reported mixed first-quarter 2014 financial results with the top line surpassing the Zacks Consensus Estimate but the bottom line missing.
By offering a convenient, reliable and secure way of accessing email in real time, BlackBerry has been able to successfully differentiate its products from the other offerings in the communications market. The company also commands a strong brand value in the wireless PDA market, leveraging the popularity of its push email system. Further, it holds 2,033 patents ranging from mobile security to push e-mail in high-end smartphones. BlackBerry’s extensive and powerful patent portfolio is also expected to support further innovation.
A major growth product for BlackBerry is its BlackBerry Enterprise Service 10 (BES10) solution. BES10 provides flexibility, scalability, high security and cost-effectiveness to its customers. Recently, the company launched the BES12 platform and expects it to generate strong service revenues in 2015.
Adding to the business activities, BlackBerry struck a licensing deal with Amazon.com Inc. (AMZN) to bring the Amazon Appstore to its customers on the BB10.3 platform. The deal will also allow BB10 users to access more than 240,000 Google Inc.’s (GOOG) Android applications at the Amazon Appstore.
In May 2014, BlackBerry initiated the shipment of budget-friendly full-touch Z3 smartphones. Z3 is a joint effort by BlackBerry and Foxconn – which will supply cheaper inventories for the manufacturing of the smartphones. Such a strategic decision will help the Canadian device maker to improve margins along with capitalizing on the booming smartphone market of Indonesia and other emerging nations.
On the flip side, BlackBerry is facing several headwinds like an ever-increasing competitive landscape, a stagnant product portfolio and an unfavorable product mix. The launch of Apple’s iPhone also posed a major blow. The situation deteriorated further after Google launched its Android software and several handset manufacturers adopted the operating system.
To worsen matters, BlackBerry’s much-awaited BB10-based smartphones failed to generate significant demand. In the fourth quarter of 2014, the company sold just around 1.1 million BB10-based smartphones out of the total handset sales of 3.4 million mobile devices.
BlackBerry currently has a Zacks Rank #2 (Buy). Another well-performing company worth considering in this sector includes RigNet, Inc. (RNET) which has the same Zacks Rank as BlackBerry.
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