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Another Production Cut at BlackBerry

Paul Ausick

Just last month, BlackBerry Ltd. (BBRY) reportedly cut production of its Z10 and Q10 smartphones from a monthly total of 2 million to 1 million after sales in the previous quarter came in short of expectations. Analyst Peter Misek at Jefferies now says that company is slicing at least another 10% from its manufacturing total.

BlackBerry launched a lower-priced version of its keyboard smartphone, the Q5, last week in Canada. A report in the Globe and Mail quotes Misek:

After the Wednesday, Aug. 14 launch of the Q5 in Canada, we contacted dozens of Canada carrier stores (Telus and Bell) and also Future Shop (similar to a Best Buy). Our survey indicates very modest demand across the three different stores and different cities. Most stores indicated that it was a soft launch, and not a big event like the launch of the Z10 and the Q10. Most stores did not receive a large amount and some had not sold any.

Misek concluded that there is “significant risk” to consensus estimates for the next two quarters as a result. He maintained his Buy rating on the stock but lowered the price target from $18 to $15.

Now that BlackBerry has announced that it is looking at the famous “strategic alternatives” that could include a sale of all or parts of the company, poor quarterly results do not weigh as much in investors’ attitude toward the stock. As long as there’s a chance that someone with deep pockets will come along and rescue them, shareholders will continue to believe. The question remains whether poor results and volatility in BlackBerry’s share price will entice a buyer. The answer to that question is left as an exercise for the reader.

Shares of BlackBerry are down 1.2% at $10.39 just before noon on Monday in a 52-week range of $6.22 to $18.32.