Service and Software Is BlackBerry Ltd’s Future
In the hopes that it might offset dwindling sales of mobile devices, BlackBerry Ltd (NASDAQ:BBRY) plans to sell some of its software on “Google Play.” The idea is that users of “Android” smartphones could download it, boosting sales. The company will offer its suite of “BlackBerry Hub+” applications, which includes a unified inbox, a password manager, and a calendar, among other features. Will this help BlackBerry stock recover, though?
The jury is still out on that, but investors appear to be appreciating the company’s recent moves. BlackBerry stock has dropped almost 15% year-to-date. Over the past three months, the trend has taken on a decidedly bullish course, with the stock increasing 15%. In the past month alone, BBRY stock has gained 18%.
The Google Play software deal is a hint as to where the company should focus: services. As explained below, these services have an increasingly security-influenced flavor.
Is This a Good Deal for Shareholders?
Perhaps, BlackBerry’s managers may have found the right path to ensure the company’s growth. According to CEO John Chen, the apps for mobile devices could bring BlackBerry back to profitability by the end of the company’s current fiscal year in February thanks to licensing agreements for its software. (Source: “BlackBerry launches Hub+ on Google Play store to lure Android users,” The Globe & Mail, August 3, 2016.)
The risk comes from the fact that BlackBerry has not given up on its hardware operations.
“I really, really believe that we could make money out of it…out of our device business,” said Chen after announcing major losses for the first quarter of its 2017 fiscal year on June 23. (Source: “BlackBerry earnings crater as smartphone company loses $670 million,” CBC, June 23, 2016.)
Chen’s insistence comes despite the fact that this area of the company spills red ink all over its sales chart with lower-than-expected sales of the “Priv,” the company’s first foray into the “Android”-powered smartphone market.
Chen’s conviction is contagious, though. He wants to turn a profit from smartphones. What’s not to like about that? Still, while Chen works on making that happen, shareholders can at least find solace in the fact that BlackBerry’s mobility solutions segment could deliver a profit during the third quarter (ending November 30, 2016). (Source: Ibid.)
Here’s the Real Strategy
BlackBerry does have a strategy to sell more mobile devices. The company has launched a new affordable phone running the Android operating system. The device is called the “DTEK50.” This is just one of many devices the company wants to introduce by the end of its fiscal year.
These efforts might not be enough to turn a profit, but many investors are increasingly looking to BlackBerry as an altogether different company than the mobile hardware manufacturer of yore. This is what is sustaining BBRY stock now.
BlackBerry has evolved. Luckily, it is continuing to evolve.
First, it was a maker of mobile handsets and smartphones with an actual keyboard. Next, it turned into more of a computer security service provider. This is a role that has give the company less public visibility, but it may ultimately pay off in share value.
In the age of WikiLeaks and alleged Russian-sponsored e-mail leaks, governments are looking to BlackBerry for mobile security. This is bound to be an ever more important business in the next few years and Blackberry has first-class accommodation to lead it.
In mid-July, BlackBerry sealed a multimillion-dollar deal that has opened the doors to future profits. Under the deal, the U.S. Senate’s security service will use BlackBerry crisis communication software. (Source: “BlackBerry Inks Software Deal With U.S. Senate,” The Wall Street Journal, July 19, 2016.)
The reason why it’s such a big deal is that BlackBerry could not have hoped for better advertising. Many governments and businesses worldwide will now surely consider using this product for their security. Investors and analysts—encouraged by Chen’s insistence on smartphones—may have missed this. Fortunately, they can now relax as BlackBerry’s evolution continues.
The Bottom Line on BBRY Stock
Judging by the need for electronic security, BBRY stock is poised for a steady recovery. BlackBerry’s next generation of Android handsets, to be unveiled before the end of 2016, might be the last major effort in that direction. The newly introduced DTEK50 offers a glimpse of the security future. Its most original features are the exclusive BlackBerry security software, which, by the way, is called “DTEK.” (Source: “BlackBerry’s security-focused Android identity crisis,” Tech Crunch, July 31, 2016.)
So, while Android product expectations may have helped BBRY stock shares recover so far this year, investors should focus more on its security and software services. These are going to be the company’s major bullish factors in the longer term.
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