The multi-year-long turnaround being performed by Canadian tech name BlackBerry (BlackBerry Stock Quote, Chart, News TSX:BB) has certainly gotten a lot of press over the years but as the quarters go by more and more doubters are coming out of the woodwork.
Count Brian Madden among them.
The portfolio manager for Goodreid Investment says not only is BlackBerry’s hardware-to-software strategy failing but they’re paying CEO John Chen way too much to lead the company down the wrong path.
“We wouldn’t buy the stock,” says Madden, senior vice president at Goodreid, who spoke to BNN Bloomberg on Tuesday. “This is a real outlier among the technology landscape in Canada and indeed, globally, all of which are mostly all of which is in a primary uptrend.”
“Blackberry is not. It’s in a downtrend,” said Madden.
BB has been on a dismal decline for over two years now, dropping from the C$17.00 range in early 2018 to now around C$6.50 per share. The stock fell as low as C$4.00 during the market pullback in March.
BlackBerry has been betting on its QNX platform for connected tech along with its cybersecurity offerings, both of which are in seemingly uptrending sectors, but so far BlackBerry’s top line hasn’t registered with investors.
BB’s latest quarterly results, delivered in late June, showed the impact of the COVID-19 pandemic on its business. The company’s revenue dropped to $206 million from $247 million a year earlier and down from $282 million for the previous quarter. BlackBerry also suffered a goodwill impairment charge related to cybersecurity offering Spark. (All figures in US dollars except where noted otherwise.)
Madden said BlackBerry is having trouble changing lanes and slimming down from its handset-making days.
“Essentially what’s been happening here is a metamorphosis of the company under the CEO John Chen who joined in 2014 and has been pivoting it away from making smartphones towards software solutions services and Internet of Things-enabled gadgets and what have you,” Madden said.
“And it’s not been a smooth transition the company,” Madden said. “Because their cost structure hasn’t fallen commensurate they’re not making money on a generally accepted accounting principles basis and really not much on an adjusted basis.”
Madden also has a bone to pick with Chen’s pay structure, which has the CEO making at least $128 million through a five-year contract renewal announced in March 2018. That figure could balloon to $400 million if certain metrics are reached.
“You know, the executive compensation is simply egregious,” Madden said. “The CEO collected something like an $85-million signing bonus package, admittedly mostly in stock options, when he joined and collected another hundred and change last year. So, about $200 million has gone out the door and in his pocket since 2014 and the strategy is not working.”
“There are lots of other better choices in technology than a turnaround fixer-upper that’s playing a small niche,” Madden said. “We wouldn’t buy it and we would sell it here, notwithstanding that they’ve got some clout and support behind them in the form of Fairfax Financial and other influential value investors. But we’re not buying this story and we’re not buying the stock.”
About The Author /
Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
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Chen sucks.
I’ve been waiting to drop this stock for almost a year now. I think I see a new Motley Fool article every two weeks on how BB could see huge gains. Still waiting.
This is the sort of thing that needs to stop! People making this much money!? It’s ridiculous! Also the world in chaos and reading this is sicking to say the lease!.
The motley fool is BS. Never listen to them or u will loose ur shirt…
As an stock player since 1992, I’ve seen both sides of a story quite often (and often I did not act in time to avoid big losses)
Many of the so called “advisers” Have a VESTED interest in ruining a company since they Short It (but it’s difficult to prove it)
The invest big and will earn biggggg if and when the company really colapses, then theY buy dirt cheap the stock (Which they sold before) retuned It to the lender and pocket the difference in relacion to the price they sold it the first time.
What I am saying is nothing new, and also the opposite is true, regarding those who pretend to be prophets and pound yours ears and brain with the same song over and over “This company is the next Apple” (or the next Lemmon if they are of the first kind aforementioned here…)
The point is this: What would hurt more, losing lots of money by a) following a “prophet” Or
b) using your own brain and loose it just as well.
In the second case a) you will win experience.(And likely no to repeat the same mistake)
In the b) case the only thing you will learn is “Not to follow fake prophets”
Despite only controlling about 10% of the stock back in late 2013, Prem Watsa got his way and installed his man Chen. When I was terminated in 2015 Watsa’s stock had an average purchase price of $17.50US. Watsa would dearly love to get his money out, and I see Chen as holding Watsa hostage. Firing Chen would embarrass Watsa, the “Warren Buffet of the North”. Watsa is big on doubling down.
Chen never understood that hardware and software together is more than the sum of the parts, and he presides over something of a holding company full of legacy acquisitions that don’t make sense now. The game played is largely one of buying or offloading acquisitions rather than organically creating anything.