BlackBerry’s future looks bleak, this investor says

With its share price now hanging out in lows not seen for years, investors may be wondering what’s in line for BlackBerry’s future (BlackBerry News, Stock Quote, Chart TSX:BB).

Not a whole lot, says Ross Healy of capital markets research firm Strategic Analysis, who argues that the future looks bleaker now that revenue growth has stalled.

BlackBerry shares were up over one per cent in trading on Thursday but the decline witnessed in the stock over recent months seems to be giving the market pause over BB’s prospects. The once dominant smartphone maker has spent a lot of energy on a multi-year remodelling into a software and security firm, a turnaround which CEO John Chen had all but declared complete earlier this year.

Pointing to revenue growth in the company’s fiscal fourth quarter earnings report in March, Chen remarked, “Everyone lost the significance that we finally have year-over-year growth.”

“When you deem a turnaround successful, that means the business has to be growing. Now, the growing business is usually not the same business that got the company into trouble in the first place,” said Chen to the Financial Post. “From a company that does US$6 billion in revenue but losing money and it’s burning cash, to a company that is over US$1 billion in software (revenue) making money and generating cash, I’d say those would be on my resume.”

BlackBerry’s future in flux:  “you’re basically speculating that somehow there’s a rabbit that Chen can pull out of a hat, but I don’t see the hat or the rabbit…”

But the market has reacted differently in recent months, dropping the stock on its fiscal first quarter delivered in June even as the company’s revenue and EBITDA results came in-line with analysts expectations.

The problem? Not enough evidence of top line growth from the company’s major acquisition Cylance, a cybersecurity company which was thought to be one of the missing (and final) pieces of the puzzle in BlackBerry’s transformation.

Instead, revenue from Cylance came in at US$32 million for the quarter, dishearteningly low when stacked up against the acquisition’s $1.4-billion purchase price.

For Healy, chairman at Strategic Analysis Corporation the time of giving BlackBerry the benefit of the doubt is now over.

“Here’s the problem with BlackBerry, John Chen has tried his best and he just can’t make this thing go. Not that they don’t have some good [assets] for the auto industry and such but they just can’t make any money out of this thing so far,” says Healy, in conversation with BNN Bloomberg on Wednesday.

“So the fair market value is way below the current price and you’re basically speculating that somehow there’s a rabbit that Chen can pull out of a hat, but I don’t see the hat or the rabbit,” he says.

BlackBerry announced on Thursday an upgrade to its partnership with Jaguar Land Rover, one which will see BlackBerry’s QNX and Cylance technologies employed in the car company’s next-generation vehicle architecture as well as having BlackBerry act in a security consulting capacity with Jaguar Land Rover.

In June, BlackBerry announced that its QNX software is now integrated in more than 150 million cars worldwide, up from 120 million a year prior and featuring car brands such as Audi, BMW, Ford, General Motors, Honda, Hyundai, Toyota and Volkswagen.