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BlackBerry Limited Message Board

  • df2830 df2830 Feb 7, 2013 11:18 AM Flag

    Dumbest 'article' yet - MF, Alec Eiber - Analyzing BB

    "Today, I would consider a Blackberry phone as the cheap flip phones of today."

    Just one example of the fine sentence structure, not to mention the "analysis". Really, this one is funny as heck, you've got to read it. The comments are funny too. He sounds like the Iraqi information minister during the (ill-conceived and tragic) invasion of Iraq.

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    • brgarrett Feb 7, 2013 12:26 PM Flag

      I don't believe there was a single positive comment regarding the author or Motley. There was, however, a great technical analysis on share price and potential sales by a user named MRVOLATILITY. I've included his note from the comments section below and hope that's alright to do...

      Let’s forget about sentiment for a sec and look at Blackberry fundamentals.

      - 2012 Net Income was $(869.0), but included in this: $690 mil goodwill writedown, and restructuring charge of $316 mil. Add those back, earnings are $137 million, or +$0.26 per share. Not good, but enough to stay on life support. The increase in cash & equiv from $1.7 to 2.7 billion from 2011 to 2012 suggests they are not burning cash to cover losses, and have been chugging along with modest means, but sufficient to keep them going without any debt or government life support.

      -In most recent quarter ended, 6.9 mil bberries and 255k playbooks were shipped for quarterly revenue of $2.7 billion and operating margin of $830 mil. In the whole world, roughly 419 million mobile phones (all brands) were sold in Q2 of 2012 (25% of which are smartphones, though USA ratio is 50.4% smartphones), so using 419 mil as a conservative estimate for upcoming quarters, I will assume 1.676 bil global mobile phone sales per year (all brands, all types). Rim market share of 2012 Q2 sales was 1.65%.

      - gross margin in 2012 was 31%, down from 44% a few years ago (and 36% last year). BB10 is a new product, so hard to say what its margin is. will conservatively assume 38% since 31% is the margin on their old phones, and BB10 is selling for a lot more. They cost $600, so operating margin is assumed to be $228 per phone.

      - Operating Expenses were $4.2 bil in 2012 and 4.6 in 2011. Will probably increase in 2013 for increased marketing efforts (so boosting to $5 bil somewhat arbitrarily)

      - Customer base is 79 million current bberry users globally. Assuming only 1/15 will upgrade this year implies ~5.3 mil unit sales in 2013 from ONLY current bberry users. If an ADDITIONAL 1.5% of the 1.676 bil 2013 sales can be captured, then that's 25.1 million more BB10s, so add the 5.3 mil from the bberry faithful, and that = 30.4 million BB10s, totalling $18.3 bil revenue and $6.9 billion gross margin (again, assuming 38% operating margin, which is probably conservative).

      - If operating expenses are indeed $5 billion, that means before tax profit of $1.9 bil (6.9-5=1.9) before sales from playbooks and older bb models have even been considered. Obviously the demand for those products is dropping and being cannibalized by BB10 sales, so in an effort to be ultra conservative, will assume 6.9 mil older bberries and 255k playbooks for all of 2013 (equal to just one quarter of results from 2012), and this will add margin of only $830 mil (again, VERY conservative). 1.9+.83 = $2.73 billion Earnings before tax, which is a whopping $5.23 per share. Their tax rate is 23.5% (federal 12, provincial 11.5) but they have built tax shelters from losses. Ignoring those though, EPS would be $4.00, which would easily justify a share price of $40.00 using a 10 x trailing P/E (conservative for a tech company, goog is like 23 or something).
      These numbers are realistic IF these things happen, but here are the ifs:

      - will 1/15 bb users actually upgrade? will it be 1/20? 1/25?

      - is the gross margin really 38% what if it's only 30%?

      - 1.5% of global mobile phones is equivalent to 6% of ALL smart phone sales. Is that realistic? can they get 10% What if it's only 3%?

      - Will operating expenses be $5 billion? Alicia Keys and the superbowl don't do charity, not for bbry, anyway

      Using the assumptions that I made above, (ie 38% BB10 margin, only $830 mil in profit margin contributed for 2013 from incumbent products, etc), the number of BB10s that have to be sold in order for bbry to break even is 18.3 million (equivalent to 1.1% of all annual mobile phones sales, or 4.4% of all annual smart phones). Keep in mind that i;ve used conservative assumptions. 38% margin is probably light, and I doubt incumbent BB product sales will shrink by a factor of 4 in one year. Nevertheless, this paints a more quantitative analysis of what BBRY is up against than some analyst making lame talking points.

      In my view, product reviews have been good, so a 1/15 upgrade rate for current bb users is a reasonable assumption, and a 6% share of new smartphone sales doesn't seem out of line when you're only up against 3, maybe 4 real competitors.
      I have simply one thing to say to all clueless Analysts or negative Journalist. This stock is bound for the Mother of All Short Squeezes. PERIOD.

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