THIS Is What BlackBerry Ltd Needs to Do
BlackBerry Ltd (NASDAQ:BBRY) reported its fiscal first-quarter results and after scouring through them, it appears that CEO John Chen still can’t let go of the company’s dismal smartphone business. While I’m not that surprised, I continue to wonder, why would BBRY hold on to this vastly underperforming segment?
Now it could be that the hardware unit accounted for approximately 36% of its full-year first-quarter revenue. Dumping that revenue stream wouldn’t be easy for BlackBerry, but it’s something that will need to be done in order for Chen to solely focus on growing its more lucrative and higher-potential software unit, which generated about 39% of BBRY stock’s Q1 revenue.
With BlackBerry stock languishing at the $6.00 level, there’s clearly a feeling that the stock market is not supportive of the company’s strategy. I know I’m not keen on it.
Chart courtesy of www.StockCharts.com
Maybe Chen has some secret formula that incorporates the smartphone? If he does, I don’t see it.
I have said BlackBerry needs to rid its smartphone unit and focus on being a software-driven company that encompasses the mobile and “Internet of Things” (IoT) spaces. Perhaps Chen is struggling to let go and see this strategy. It may not be easy, but it’s necessary at this time.
Maybe we are seeing the shift to a software-only company coming. BBRY stock did say that it would be dumping its once-iconic “Classic” smartphone. While that’s a start, BlackBerry needs to finish the job and liquidate the entire unit.
Now there’s news that BlackBerry will launch more “Android”-powered phones. I don’t get that move. It appears the company’s Android phones haven’t gained much traction—also not that surprising given the massive competition from much cheaper Android phones—so why keep going?
Recall when Chen suggested BlackBerry would need to sell about six million phones this year to break even? Well, the company didn’t release the details on how many phones it actually sold in the FYQ1, but I doubt it was anywhere close to the 1.5 million units it would need to keep on track to six million. Otherwise, I think Chen would be banging the drums in celebration.
This Could Send BBRY Stock Soaring
BlackBerry is clearly trying to build on its software business to the point where it accounts for more than 50% of the company’s revenue. If it continues to do so, maybe we could see a change in direction for BBRY stock.
The company is showing some positive moves as it develops and refines its “QNX” platform and services for the Internet of Things. With about $2.5 billion in the bank, BlackBerry will have time to do this.
I see the QNX platform for vehicles being a major growth area for BlackBerry, especially given its involvement in the growing advanced driver assistance systems (ADAS) field. The fact is that with QNX powering tens of millions of entertainment units in vehicles, the potential of a well-executed plan could be enormous for the company.
In another intriguing move, the company just introduced “BlackBerry Radar,” a device and application powered by QNX to be used by trucking companies for tracking assets in what is a high-growth market. There are many rivals in this segment, but BlackBerry can accelerate its acceptance via its QNX platform.
This is the kind of innovative thinking that ultimately can propel BlackBerry stock to become relevant again. It just needs to dump the smartphone business.