Blackberry Stock Has Its Best Potential in Years
BlackBerry Ltd (NASDAQ:BBRY) made the right decision.
Last week, the Canadian company, once known as Research in Motion (RIM), decided it was time to hang up the phone. Blackberry stock reacted favorably, as the company finally took a decision that many sector analysts had long advocated.
Yet on Monday, Blackberry stock was down. Are BBRY investors especially temperamental, or do they know something the rest of us don’t? The question begs asking because, if anything, the big mobile phone hardware news in the first week of October 2016 confirms—if anyone still doubted it—that Blackberry made the right decision. Indeed, none other than Google, otherwise known as Alphabet Inc (NASDAQ:GOOG), will be offering its first branded phone: an Android.
With a new name, and said new exclusive marketing, Alphabet Inc, or Google, has scrapped the “Nexus” phone to offer handsets with the Google brand name. Nexus handsets were elusive, rarely available in shops. Known mostly to techies and developers, the Nexus devices never quite experienced the level of success of the smartphone industry leaders such as Samsung or Huawei. But the Google phone is altogether different.
Persistence Would not Have Paid Off for Blackberry
Google’s new phone might just become the best “Android” unit. It could not only compete with “iOS” effectively, but also attract many sales away from other Android experiences. In other words, Blackberry bit the bullet and survived. The “Google Phone” would have wiped it clean. So it was best for BBRY shares to quit while still having something to quit.
Google’s new “Pixel” and “Pixel XL” handsets will have huge brand visibility. The new units will also launch “Android 7.1.” The official presentation on October 4 will reveal more details about the technology. Suffice it to say, it will likely be a better version of Android than what you may find on your Samsung.
Blackberry’s handset division was bleeding cash. Meanwhile, Blackberry’s Android and iOS competitors managed to catch up to Blackberry in security. This has made the unique BBRY operating system less practical in a world dominated by the likes of Apple Inc. (NASDAQ:AAPL) and the variety of Android manufacturers such as Samsung. In short, sooner or later, Blackberry’s phones would have been driven out of the market.
Blackberry Should Improve Cash Flow and Cut Costs
Apart from some collaborative efforts, possibly in Indonesia as rumors suggest, Blackberry will focus on where its profits have come from: software. But some investors may have taken the September 28 announcement from Blackberry, about renouncing smartphone design and manufacture, with some fear. They must be wondering if, despite the logical defense of the move from the financial point of view, it might bring the end of the brand.
There’s no end in sight. Indeed, the end of phone design after successive quarters of losses with as clear a culprit (lagging Blackberry phone demand) actually terminates a long agony. The various efforts to improve sales have not borne fruit. What will bear fruit for investors is Blackberry putting more energy into developing apps. The company is now freer to pursue apps for all platforms (both iOS and Android). The brand has retained all of its expertise in this area, while being able to exploit its ultra-successful BBM messaging platform.
Blackberry can also leverage its considerable license portfolio. In other words, it will sell the right to external manufacturers to use the BlackBerry name for an annual income. The process has already started in Indonesia, the most flourishing market for the brand. The BlackBerry phone and its physical keyboard have acquired icon status. This opens the style to other brands, which might want to emulate the keyboard, requiring a licensee. Many manufacturers might want to revive the traditional BBRY keyboard, but not the first BlackBerry platform.
So we will see the Blackberry physical keyboard, but BBRY stock will not have to suffer any longer before the now-unsurmountable competition from giants like Apple, Microsoft Corporation (NASDAQ:MSFT) or Google! The Chinese, meanwhile, are flooding the market with excellent quality/price characteristics. They will also make life difficult for the Samsung and HTC Corporations of this world.
Simply put, BBRY stock without the handsets improves its cash and margins position. Many analysts see the short-term target price for BBRY falling anywhere between $6.00 and $11.00. Under the new handset-less conditions, the higher price target seems more realistic.