BlackBerry Limited: BlackBerry(BBRY) Stock Is Going to $0… Unless It Does This

More Bad News for BlackBerry StockMore Bad News for BlackBerry Stock

BlackBerry Ltd (NASDAQ:BBRY) was one of the top traders in the technology segment last Friday, but it was unfortunately for the wrong reasons. BBRY stock got slammed by traders and short sellers after the company reported another bad quarter for its problematic smartphone unit that continues to be irrelevant in the world.

BBRY reported a disappointing and underwhelming $464.0 million in its fiscal fourth quarter, which was way short of the $563.2 million consensus predicted by Thomson Financial. That’s a huge miss, folks! BlackBerry returned to the loss column. (Source: “Analysts’ Estimates,” Yahoo! Finance, last accessed April 1, 2016.)

The last time I talked about BBRY, I was somewhat optimistic that CEO John Chen could ultimately turn things around. I was optimistic he would begin to sell the company as a developer of advanced enterprise mobile software targeted for the “Internet of Things” environment, instead.

The problem is that Chen, while seeing some progression in its enterprise segment, doesn’t seem to want to let go of BlackBerry’s troubled hardware business.

My belief in Chen is beginning to fade as BlackBerry continues to sell its smartphones in an extremely competitive marketplace where it has less than one percent of the global market.

blackberry nasdaq stock chart

Chart courtesy of www.StockCharts.com

No One Cares about BlackBerry Phones

Even shifting the operating system of its highly rated “Priv” smartphone to Alphabet’s “Android” from the “BB10” operating system appears to be gaining very little traction.

BlackBerry reported a mere 600,000 smartphones were sold in the quarter without a breakdown of the devices sold, so it’s hard to tell how the Priv really fared. And while that add up to 2.4 million units on an annualized basis, it’s way short of the three to five million units Chen was hoping for to become profitable. Something is clearly going amiss here.

A look on the BBRY site shows a 20% discount on the “Passport” smartphone. If you go to the resellers, you will also notice that the price of the Priv has been slashed in many cases so the prognosis doesn’t exactly look taut good for BlackBerry.

Chen still won’t give in on the poor numbers. I think he is making a mistake.

BlackBerry needs to decide what it wants to be: a seller of enterprise software or a bogged-down smartphone maker suffering from ever-weaker sales.

In the fiscal fourth quarter, software and licensing revenue came in at $527 million, which was above the company’s target. Revenues were largely driven by the addition of Good Technology.

What BlackBerry needs to do is to move forward as a software company and refine and develop great applications for the Internet of Things, including the auto entertainment market via its subsidiary QNX Software Systems Limited.

At this juncture, revenues are estimated to contract another 7.1% for full-year 2017, but they could very likely be lower unless the company’s smartphone unit shows some life.

The company still has nearly a billion dollars in free cash, but this will continue to dwindle based on the losses mounting in BlackBerry’s smartphone business. Chen needs to make a decision soon on its hardware unit or risk more hemorrhaging for investors.

Failure to gain any ground on Apple Inc., Samsung, or the many Android-powered devices on the market can only mean one logical decision for BBRY stock.