Will BlackBerry Ltd (BBRY) Stock Hold $10 or Slip Into Irrelevance?
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After reporting disappointing earnings last month, BlackBerry Ltd (NASDAQ:BBRY) fell off traders’ radar. BBRY stock is now fighting the dreaded $10 per share threshold that marks the border between companies we look at and those we ignore.
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At today’s opening price of $9.93 per share Blackberry has a market cap of about $5.3 billion. At its height, almost exactly 10 years ago, BBRY traded at $230 per share. BlackBerry was a $100 billion company worth beloved for its ability to let busy executives see, and quickly respond to, floods of incoming e-mail.
One of the big questions of late 2008 was whether then-incoming President Barack Obama would be able to keep his Blackberry in the White House. He didn’t keep it. Neither, in the end, did anyone else.
Among tech writers, the name became something of a joke.
Blackberry Inside
Today, the Canadian company is trying to remake itself as a software house, focused on secure messaging and fleet management. The stock got a big boost after winning a $814.9 million arbitration case with Qualcomm, Inc. (NASDAQ:QCOM) and investors are now betting on what will happen to the money.
So far, the numbers are disappointing. Blackbery headlined profitability in its earnings report for the May quarter, but revenue was just $235 million, down from $400 million a year earlier.
Our James Brumley described this in the kindest way possible, writing that the stock succumbed to “the creep of doubt.” In terms of reputation it was more like a fall from a substantial height, the shares falling from $11.06 to $9.71 in one day, a 12% drop. More to the point, they haven’t recovered.
Meanwhile, Richard Saintvilus, who remains a Blackberry bull, notes that enterprise software now accounts for 40% of the company’s revenue, and that it has cut its expenses to become purely a software play, one that can grow revenue 10%-15%.
History Doubts Second Acts
My own view is more bearish. There are very few second acts in the technology business, Apple Inc. (NASDAQ:AAPL) and Steve Jobs notwithstanding. Software, in particular, seldom ages well. The idea that earlier breakthroughs can become the equivalent of an annuity is a story that just doesn’t come true very often.
It can be realized if the underlying product was a failure right out of the gate, which I have seen with my own eyes.
More than 30 years ago, at the dawn of the IBM PC era, I helped write the manual for a PC-based home shopping service that was dead on arrival. But the CEO found his team had crafted a great electronic data interchange engine (EDI), and Harbinger Corp. reached $155 million in revenue before selling out to Peregrine Systems in 2000.
Blackberry is a different story.
The company has already had a good run. The software is ancient, which is why CEO John Chen is trying to find a place for it inside systems, well away from consumers and analysts who consider it a punch line. QNX, the entertainment system software that Blackberry is so high on, dates from the days when I had hair.
There was hope that a relationship with Toyota Motor Corp (ADR) (NYSE:TM) might turn into something, but those hopes were dashed in June. Blackberry tried to spin it, but a loss is a loss, and the losses in the auto market seem to be continuing.
Bottom Line for BBRY Stock
I have been wrong before, but all the instincts developed in 35 years covering technology tell me the Blackberry story is not going to end well, for either BBRY investors or the company.
I would love to be proven wrong, but I am not betting money on it.
Dana Blankenhorn is a financial and technology journalist. He is the author of the political polemic Saving Trumpistan, Restoring Democracy, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.
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