On Jul 3, 2015 we issued an updated research report on Canadian handset maker BlackBerry Ltd. BBRY. Notably, the company expects to generate positive free cash flow and non-GAAP earnings in 2016.
Recently, BlackBerry reported first-quarter fiscal 2016 financial results with both the top and the bottom line comparing unfavorably with the Zacks Consensus Estimate. However, in the reported quarter, Software and technology licensing revenues jumped150% year over year.
Ever since Apple Inc.’s AAPL iPhone hit the market, BlackBerry and Nokia Corp. NOK have been facing intense competitive pressure. The sale of smartphone worsened with the launch of Google Inc.’s GOOG Android software, which was an instant hit.
Earlier, BlackBerry announced its decision to retrench workers on a global basis. We believe that such layoffs are just a temporary solution and will have a minimal impact on the company’s bottom line. We remain concerned about the company’s decision to change the structure of its high-margin services fees segment.
On the bright side, BlackBerry has been exploring several alternate business options which should help the company offset escalating losses in its smartphone business. Meanwhile, the company’s BES12 platform is also gaining considerable traction.
Moreover, BlackBerry commands a strong brand value in the wireless PDA market, leveraging on the popularity of its push email system. The company holds 2,033 patents ranging from mobile security to push email in high-end smartphones. Also, a strong patent portfolio is expected to help in further innovation. Recently, the company struck a long-term patent cross-licensing deal with Cisco. Such favorable developments are likely to drive profits for the company moving ahead.
Currently, BlackBerry carries a Zacks Rank #3 (Hold).
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