Even The Bulls Are Giving Up On Hardware
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- 188
As I was going over my emails this morning I came across the article of SA, contributor Mark Hibben, a known shorter for BlackBerry. I wanted to see your opinions here regarding the BlackBerry hardware business and his (according to me) wrongfully made conclusions...
BlackBerry: Even The Bulls Are Giving Up On Hardware - BlackBerry Ltd. (NASDAQ:BBRY) | Seeking Alpha
Summary
Recent bullish sentiment on BlackBerry acknowledges hardware weakness, but points to software and services as growth areas.
Enterprise mobile device management is pointed to as an opportunity for BlackBerry.
The ongoing collapse of the hardware business will probably force BlackBerry out of hardware some time in the coming year.
In anticipation of weak hardware sales for BlackBerry's upcoming fiscal Q4 report on Friday, the investment thesis of bulls has pivoted away from hardware. The focus is now on software and services, deemed to be areas of potential growth for BlackBerry (NASDAQ:BBRY). While possible, this outcome is unlikely, as enterprise embraces Apple's (NASDAQ:AAPL) iPhone, and the Apple/IBM (NYSE:IBM) partnership provides a more compelling mobile device management solution
Circling the Drain
A couple of bullish articles on BlackBerry have appeared recently on SA that basically say, "don't worry about hardware." Shock Exchange acknowledged my observations about BlackBerry hardware sales, but argued that "network externalities" would stimulate BlackBerry's enterprise services business. Alex Cho was even more explicit in his exhortation to "ignore hardware" and focus on the company's software business.
Why do BlackBerry bulls want us to ignore hardware? Because the hardware picture is really dreadful. BlackBerry's phones are simply non-competitive. This is due in large part to the recycling of the commodity hardware paradigm by BlackBerry, which has become more and more untenable. BlackBerry phones use Qualcomm (NASDAQ:QCOM) processors, and not even particularly exceptional Qualcomm processors. Almost everything in the Android or iOS device worlds outclasses BlackBerry's best. This can be seen by going to the Geekbench website. In the chart below, I summarize Geekbench performance results for BlackBerry and some Samsung Android and Apple iOS devices (higher scores are better).
As a consequence, very few people are buying the phones. As of IDC's latest data on smartphone OS market share, BlackBerry had just a 0.4% market share in calendar 2014 Q4 and for the entire year of 2014. Market share is the percentage of new phone sales, and BlackBerry's rate of new sales is now no longer enough to support the BlackBerry OS ecosystem.
This can be seen in the continuing implosion of BlackBerry's hardware user base. As of the fiscal 2015 Q3 earnings report BlackBerry management acknowledge on page 3 of the Management Discussion section that the hardware user base has shrunk to 41 million. The chart below shows the contraction of user base and Services revenue since the baseline of fiscal 2014 Q1, when BlackBerry had a user base of 62 million and Service revenue of $794 million.
The hardware situation is unlikely to improve for fiscal 2015 Q4. The Kantar Worldpanel smartphone OS results indicate that BlackBerry's market share has continued to collapse in every major market throughout the world. Based on the Kantar data, I predict that sell through to end users will be about 2.2 million units, a y/y decline of about 35% from fiscal 2014 Q4.
Increasingly Speculative
In the face of the ecosystem collapse, the investment thesis on behalf of BlackBerry has become precariously speculative, involving predictions of where BlackBerry might be 10 years from now. I pride myself on a certain amount of foresight, but even I wouldn't venture that far into the future.
Bulls can point to the BlackBerry/Samsung (OTC:SSNLF) partnership and the Samsung-based SecuTABLET, but it's not clear how much revenue BlackBerry will derive from these. Mobile device management might be an inviting opportunity were it not for the hardware collapse. Yes, BES is cross-platform. So what. Here's the fundamental problem for BlackBerry.
As this report from Good Technology shows, enterprise is overwhelmingly choosing the iPhone. As the chart below shows, BlackBerry is in the 1% "Other" classification.
The report points out that iOS is particularly strong in "regulated" industries, with a 95% share of the legal industry, 82% share of the public sector and 81% of financial services.
The reason for this is that Apple has built an extremely secure smartphone operating system. Apple's encryption is so good that it was criticized for being too good by the director of the FBI last year. Apple CEO Tim Cook went on to defend Apple at the White House security summit.
I often hear BlackBerry bulls extol the virtues of BlackBerry's security, and it's possible that it's even better than Apple's. But if the U.S. government can't break Apple's security, how much better does it need to be? The adoption of iOS by enterprise already provides the answer: BlackBerry's much-lauded security offers little added value.
If security doesn't provide an important discriminator relative to iOS, then that leaves mobile device management (MDM) as the last hope. But it's a false hope. The reason is the Apple/IBM partnership.
MDM has been a weak spot in iOS, and it hurt Apple in education last year. Apple realized that the adoption rate in enterprise was unsustainable without a better MDM solution, which is the reason for the IBM partnership. The IBM partnership provides enterprise-class MDM, as well as the support infrastructure that IT departments expect from IBM. The IBM partnership, combined with the high adoption rate of iOS devices, effectively slams the door in the face of BlackBerry's MDM aspirations.
What to Look for in the Earnings
BlackBerry typically doesn't highlight the user base number in its initial earnings release, so investors won't know that until the full report gets posted on line. Hardware sell-through will probably come in at around the 2.2 million units I'm predicting. The hardware story is almost a foregone conclusion.
What investors should look for is some sign of growth in the Software and Service segments. I don't expect any, however, because the growth premise is fundamentally flawed. I continue to regard BlackBerry as a short opportunity, although not for much longer. At some point in the fiscal first or second quarters, the hopes of the BlackBerry bulls will prove vain, and the price of the stock will collapse.
What will trigger the collapse? Chen has a decision to make, and he has to make it soon. Either BlackBerry gives up on hardware altogether, or it faces bankruptcy at some point in the coming fiscal year as it burns through its remaining cash. I'm betting that Chen will do the smart thing and get out of hardware. It's really the only way to save the company at this point.
But getting out of hardware will shake the faith of BlackBerry bulls to the core, and for good reason. BlackBerry without hardware is a much smaller company, and the cost of divesting the hardware business could be huge. That much smaller BlackBerry is not reflected in the company's current valuation.
Posted via CB10Last edited by mauro316; 03-25-15 at 09:31 AM.
03-25-15 09:05 AMLike 0 -
- 188
Well, basing your analysis on sales volumes for example, should Ferrari or Bentley stop making cars because of their sales volumes?
How reliable is for someone to use a report from Good Technology, wouldn't it be biased?
Posted via CB1003-25-15 10:56 AMLike 3 -
- 1,932
Both companies have struggled to survive and have been through multiple owners since they were actually Ferrari and Bentley, so probably not the best example.
Posted via CB1003-25-15 01:43 PMLike 0 -
- 2,305
Analysts are a myopic when it comes to BB. IF they even bothered to listen to Chen,,, they would be comparing BB to IBM.. not Apple and Sammy... guess they did not get the notice that in a year of two hardware will be a side line... in the end it does not matter what any of them think as the proof will be in the financials. The only thing these articles hurt is the average investor who is not smart enough to stay away from the stock... Those who short the stock are the ones with money to make money with constant hardware talk....03-25-15 02:45 PMLike 0 -
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Or course the only reason Good exists is IOS security is poor if naked.
http://observer.com/2015/03/watch-th...e-lock-screen/
Without fail, every iteration of IOS has had lock screen issues. This one was just patched. I guess the wizard at Apple figured out ++i != i++
Posted via CB1003-26-15 07:50 PMLike 0 -
- 1,404
"...
The reason for this is that Apple has built an extremely secure smartphone operating system. Apple's encryption is so good that it was criticized for being too good by the director of the FBI last year. Apple CEO Tim Cook went on to defend Apple at the White House security summit.
..."
My favorite part!!
Posted via CB10Fidel Mercado likes this.03-26-15 08:00 PMLike 1 -
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I just found the article where this information was taken from, said no one ever..."...
The reason for this is that Apple has built an extremely secure smartphone operating system. Apple's encryption is so good that it was criticized for being too good by the director of the FBI last year. Apple CEO Tim Cook went on to defend Apple at the White House security summit.
..."
My favorite part!!
Posted via CB10
Posted via CB10Fidel Mercado likes this.03-26-15 08:11 PMLike 1 -
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Wow, they can decrypt bb10 backups if they know the password. ;-)
To break into the iphone they need access to a desktop computer that has accessed the phone. This has been an Apple security bug for years:
"The Forensic edition of Elcomsoft Phone Breaker enables over-the-air acquisition of iCloud data without having the original Apple ID and password. Password-free access to iCloud data is made possible via the use of a binary authentication token extracted from the user�s computer."
Of course, this requires a black bag job or a warrant.
In all fairness, elcomsoft is a top notch company. You may recall they cracked the older BlackBerry OS using an encrypted SD card as the basis for the attack.
As a rule of thumb, for security, you want to reduce the attack surface. Notifications on the lock screen should be a avoided. In the case of IOS, that stupid Siri is a huge attack surface. I don't know about IOS8, but you could break the lock on IOS7 using Siri.
Posted via CB1003-27-15 03:29 AMLike 0 -
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That SA article is a complete Joke. The author wants BlackBerry to abandon hardware so the company can fold over and die. Hardware and Software is the future for this company and combined will combat SAF decline.03-27-15 01:52 PMLike 0 -
- 7,228
Prem WatsAppCrackBerry Jester of JestersOT:
Yeah, 7 character dictionary password, LMBO... ? :-)))))Wow, they can decrypt bb10 backups if they know the password. ;-)
To break into the iphone they need access to a desktop computer that has accessed the phone. This has been an Apple security bug for years:
"The Forensic edition of Elcomsoft Phone Breaker enables over-the-air acquisition of iCloud data without having the original Apple ID and password. Password-free access to iCloud data is made possible via the use of a binary authentication token extracted from the user�s computer."
Of course, this requires a black bag job or a warrant.
In all fairness, elcomsoft is a top notch company. You may recall they cracked the older BlackBerry OS using an encrypted SD card as the basis for the attack.
As a rule of thumb, for security, you want to reduce the attack surface. Notifications on the lock screen should be a avoided. In the case of IOS, that stupid Siri is a huge attack surface. I don't know about IOS8, but you could break the lock on IOS7 using Siri.
Posted via CB10
Quote:
"...
According to multiple security researches, the majority of users choose meaningful, dictionary-based passwords that are easier for them to remember. "
Well, just simply don't. :-)
Quote:
"...
The recovery of BlackBerry (prior to verison 10) password is possible if the user-selectable Device Password security option is enabled to encrypt media card data. By analyzing information stored on encrypted media cards, Elcomsoft Phone Password Breaker can try millions password combinations per second, recovering a fairly long 7-character password in a matter of hours . With the ability to recover the device password, ElcomSoft does what's been long considered impossible, once again making Elcomsoft Phone Password Breaker the world's first."
----
You kidding?
So they're just plain-old brute forcing it with GPU assistance.
Good luck with a 12+ character non-dictionary, non-alphanumeric password then, I should just add a few more chars for kicks...
� Passposted while waiting for the Zzzzzlider.... �03-27-15 09:34 PMLike 0 -
- 188
I guess you didn't get it was an analogy, comparing sales volumes of the car market, we could imply that by sales volumes companies like ferrari or Bentley should be put of the market. Which of course is not the case. They are very profitable companies.
I understand that the selling price of a Ferrari is not that of a Ford for exple, but so the manufacturing costs are not the same either. There is a much bigger spread however on their sales. This is just to represent an incorrect analysis which is only based on sales volumes.
Posted via CB1003-28-15 01:18 PMLike 0 -
- 9,195
BlackBerry has neither the volume or the high profit per device. If they had one or the other then they would be fine, but their volumes are declining and ASP is only inching up. The brand is also severely tarnished too. When most people hear BlackBerry, they associate it with BBOS and a dying brand.I guess you didn't get it was an analogy, comparing sales volumes of the car market, we could imply that by sales volumes companies like ferrari or Bentley should be put of the market. Which of course is not the case. They are very profitable companies.
I understand that the selling price of a Ferrari is not that of a Ford for exple, but so the manufacturing costs are not the same either. There is a much bigger spread however on their sales. This is just to represent an incorrect analysis which is only based on sales volumes.
Posted via CB10
Posted via CB1003-28-15 02:35 PMLike 3 -
- 136
Software sales are up, hardware is gross margin positive. There is still 47 percent revenue from hardware. SAF will continue to fall with BlackBerry users. They know this already. They need time to bring on the new software businesses and keep hardware going to keep the revenue numbers up. ASP for devices is upAs I was going over my emails this morning I came across the article of SA, contributor Mark Hibben, a known shorter for BlackBerry. I wanted to see your opinions here regarding the BlackBerry hardware business and his (according to me) wrongfully made conclusions...
BlackBerry: Even The Bulls Are Giving Up On Hardware - BlackBerry Ltd. (NASDAQ:BBRY) | Seeking Alpha
Summary
Recent bullish sentiment on BlackBerry acknowledges hardware weakness, but points to software and services as growth areas.
Enterprise mobile device management is pointed to as an opportunity for BlackBerry.
The ongoing collapse of the hardware business will probably force BlackBerry out of hardware some time in the coming year.
In anticipation of weak hardware sales for BlackBerry's upcoming fiscal Q4 report on Friday, the investment thesis of bulls has pivoted away from hardware. The focus is now on software and services, deemed to be areas of potential growth for BlackBerry (NASDAQ:BBRY). While possible, this outcome is unlikely, as enterprise embraces Apple's (NASDAQ:AAPL) iPhone, and the Apple/IBM (NYSE:IBM) partnership provides a more compelling mobile device management solution
Circling the Drain
A couple of bullish articles on BlackBerry have appeared recently on SA that basically say, "don't worry about hardware." Shock Exchange acknowledged my observations about BlackBerry hardware sales, but argued that "network externalities" would stimulate BlackBerry's enterprise services business. Alex Cho was even more explicit in his exhortation to "ignore hardware" and focus on the company's software business.
Why do BlackBerry bulls want us to ignore hardware? Because the hardware picture is really dreadful. BlackBerry's phones are simply non-competitive. This is due in large part to the recycling of the commodity hardware paradigm by BlackBerry, which has become more and more untenable. BlackBerry phones use Qualcomm (NASDAQ:QCOM) processors, and not even particularly exceptional Qualcomm processors. Almost everything in the Android or iOS device worlds outclasses BlackBerry's best. This can be seen by going to the Geekbench website. In the chart below, I summarize Geekbench performance results for BlackBerry and some Samsung Android and Apple iOS devices (higher scores are better).
As a consequence, very few people are buying the phones. As of IDC's latest data on smartphone OS market share, BlackBerry had just a 0.4% market share in calendar 2014 Q4 and for the entire year of 2014. Market share is the percentage of new phone sales, and BlackBerry's rate of new sales is now no longer enough to support the BlackBerry OS ecosystem.
This can be seen in the continuing implosion of BlackBerry's hardware user base. As of the fiscal 2015 Q3 earnings report BlackBerry management acknowledge on page 3 of the Management Discussion section that the hardware user base has shrunk to 41 million. The chart below shows the contraction of user base and Services revenue since the baseline of fiscal 2014 Q1, when BlackBerry had a user base of 62 million and Service revenue of $794 million.
The hardware situation is unlikely to improve for fiscal 2015 Q4. The Kantar Worldpanel smartphone OS results indicate that BlackBerry's market share has continued to collapse in every major market throughout the world. Based on the Kantar data, I predict that sell through to end users will be about 2.2 million units, a y/y decline of about 35% from fiscal 2014 Q4.
Increasingly Speculative
In the face of the ecosystem collapse, the investment thesis on behalf of BlackBerry has become precariously speculative, involving predictions of where BlackBerry might be 10 years from now. I pride myself on a certain amount of foresight, but even I wouldn't venture that far into the future.
Bulls can point to the BlackBerry/Samsung (OTC:SSNLF) partnership and the Samsung-based SecuTABLET, but it's not clear how much revenue BlackBerry will derive from these. Mobile device management might be an inviting opportunity were it not for the hardware collapse. Yes, BES is cross-platform. So what. Here's the fundamental problem for BlackBerry.
As this report from Good Technology shows, enterprise is overwhelmingly choosing the iPhone. As the chart below shows, BlackBerry is in the 1% "Other" classification.
The report points out that iOS is particularly strong in "regulated" industries, with a 95% share of the legal industry, 82% share of the public sector and 81% of financial services.
The reason for this is that Apple has built an extremely secure smartphone operating system. Apple's encryption is so good that it was criticized for being too good by the director of the FBI last year. Apple CEO Tim Cook went on to defend Apple at the White House security summit.
I often hear BlackBerry bulls extol the virtues of BlackBerry's security, and it's possible that it's even better than Apple's. But if the U.S. government can't break Apple's security, how much better does it need to be? The adoption of iOS by enterprise already provides the answer: BlackBerry's much-lauded security offers little added value.
If security doesn't provide an important discriminator relative to iOS, then that leaves mobile device management (MDM) as the last hope. But it's a false hope. The reason is the Apple/IBM partnership.
MDM has been a weak spot in iOS, and it hurt Apple in education last year. Apple realized that the adoption rate in enterprise was unsustainable without a better MDM solution, which is the reason for the IBM partnership. The IBM partnership provides enterprise-class MDM, as well as the support infrastructure that IT departments expect from IBM. The IBM partnership, combined with the high adoption rate of iOS devices, effectively slams the door in the face of BlackBerry's MDM aspirations.
What to Look for in the Earnings
BlackBerry typically doesn't highlight the user base number in its initial earnings release, so investors won't know that until the full report gets posted on line. Hardware sell-through will probably come in at around the 2.2 million units I'm predicting. The hardware story is almost a foregone conclusion.
What investors should look for is some sign of growth in the Software and Service segments. I don't expect any, however, because the growth premise is fundamentally flawed. I continue to regard BlackBerry as a short opportunity, although not for much longer. At some point in the fiscal first or second quarters, the hopes of the BlackBerry bulls will prove vain, and the price of the stock will collapse.
What will trigger the collapse? Chen has a decision to make, and he has to make it soon. Either BlackBerry gives up on hardware altogether, or it faces bankruptcy at some point in the coming fiscal year as it burns through its remaining cash. I'm betting that Chen will do the smart thing and get out of hardware. It's really the only way to save the company at this point.
But getting out of hardware will shake the faith of BlackBerry bulls to the core, and for good reason. BlackBerry without hardware is a much smaller company, and the cost of divesting the hardware business could be huge. That much smaller BlackBerry is not reflected in the company's current valuation.
Posted via CB10
Posted via CB1003-29-15 03:28 AMLike 0 -
- 131
That's my point. And lets talk about absolutely no marketing behind the hardware nor the BB10 OS at all from what I've seen for more than 18 months now. Drop the hardware and there goes your 47% contribution, there goes your current pissed off 11+ Million BB10 owners. Will they ever trust BlackBerry again if they were to all of a sudden shut down the handsets?Software sales are up, hardware is gross margin positive. There is still 47 percent revenue from hardware. SAF will continue to fall with BlackBerry users. They know this already. They need time to bring on the new software businesses and keep hardware going to keep the revenue numbers up. ASP for devices is up
Posted via CB10
There's absolutely no logic in closing the handset business. Don't blame the hardware nor the superior BB10 OS, blame the marketing teams past incompetence that not only messed up the initial BB10 launch, but also did nothing meaningful after the screw up. And they wonder why BB10 is not selling as it should. People view BlackBerry and OLD BBOS BOLD devices. That is the problem.crackberry_geek likes this.03-29-15 09:55 PMLike 1 -
- 2,032
Apple's encryption is good, in this sense: new iphones will come with the encryption setting on and if someone gets ahold of your phone they won't be able to break into the data you have stored on it...
...this says nothing about secure end to end encrypted communication, however.
Posted via CB1003-30-15 02:36 PMLike 0
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