[Corbu]

Essential parts of the Morgan Stanley report.

Will post more later.

January 13, 2015

BlackBerry Ltd

BlackBerry Prospects Among Customers Get Worse; Market Expectations Remain Too High

During a period that would typically see increasing evaluation and deployment activity, our proprietary CIO survey showed that BlackBerry’s prospects continue to get worse.

MS CIO Survey: BlackBerry is the only declining MDM/EMM platform. Our proprietary survey of CIOs found that among named mobile device/enterprise mobility management solutions, BlackBerry was the ONLY platform that saw a sequential decline in the % of respondents who have either purchased or planned to purchase the company’s solution (see Exhibit 1). Further, the total number of respondents that had purchased or planned to purchase the BlackBerry solution declined to about 8%, well below the 50-100% market share we estimate that the company will need to capture in the next ~4 quarters if it is going to come close to hitting its stated target of increasing its software revenue to $500mm in FY16, of which we estimate that approximately $350mm will need to come from MDM/EMM software. Our CIO Survey results are gathered from 150 CIO's from the US and Europe, representing companies with $500mm in revenue or more, across nearly every vertical.

Intent to evaluate also declined; only metric that increased was “Evaluated, No Intent to Deploy.” Not only did the number of respondents get worse, but the number of respondents that plan to even evaluate the BlackBerry platform at all also declined to around only 15% of all respondents (see Exhibit 2). We view this as a negative indicator given the marketing efforts and expectations that the company is creating that its new BES 12 product will lead to substantial reevaluation of existing MDM/EMM solutions—we are seeing zero evidence of such behavior across our survey group. In fact, Blackberry was at or near the top in several categories like “No Plans to Evaluate” and “Evaluated, Not Interested” (see Exhibits 3 and 4) — hardly the indication of burgeoning interest that the market has built into estimates and valuation, especially given that the overall market for MDM/EMM solutions will be only about $800mm ex-BlackBerry in 2015, and we believe has been stagnant at roughly 30mm subscribers since the 2010 time frame.

Market valuation implies 80%+ more in software & messaging revenue that the company is promising. We estimate BlackBerry's current ~$10 price implies ~$1bn in software and messaging revenue for FY16. We derive this by assuming a 4x multiple (average for high growth software names) on software & messaging revenue and give no credit for additional revenue (hardware business expected to run breakeven and services base is dissolving as subscribers switch to BB10+ devices). Given the company has only promised $600mm in combined software & messaging revenue, the market is giving credit for nearly 7x this revenue base at the current valuation, far ahead of market multiples. At the very least, owners of BBRY seem to be justifying those valuations on the idea that the company can hit its FY16 revenue targets and exit FY16 on those higher revenue run rates implied by the valuation.

Promised targets already look aggressive. As we commented on in our December 19th note, we think the company will struggle to achieve the $600mm in stated software and messaging targets for FY16. Given the long sales cycle (6-9 mos), the change in sales model (utilizing a new direct sales force), and that many of these conversations with customers have not yet begun (the product just became available itself in November), the company is not expecting significant software revenue until Q2 of CY15.

While balance sheet and operating improvements are impressive, company needs to deliver on revenue growth. We believe the majority of the move in the stock post-earnings on December 19th was due to the market being surprised about BlackBerry reporting they generated cash and non-GAAP profits in 3Q FY15. While this validates that the company can operate on a smaller scale than previously expected, the company needs to figure out a way to return to revenue growth, replacing declining service revenue with software & messaging revenue, in order to be an ongoing concern. With services revenue declining faster than expected and software revenue further off than expected, we see few reasons to buy into the stock.

Remain underweight with a $7 PT. We believe that to justify the current EV of $4.1bn, the company needs to get to ~$1bn in annual revenue from software and messaging, using a generous 4x EV/revenue valuation multiple. Not likely, but we think that the company is preserving assets (and hence optionality) well and that an implied EV of $2.5bn at $7 on the company eventually (2-4 years) being able to build a $600mm/yr software and messaging business seems reasonable to us.

[bbjdog]

Looks like the anti freedom, democracy and free market BlackBerry hating shorts are playing their games. I would say these organized shorts are anti canadian and trying to keep another great canadian company down. History has proven the US will take all measures to take down a superior company down like BlackBerry just like they did with the Avro arrow which was at least a decade ahead of anyone else at the time. Talk to those old guys who were working there at the time. They will blow your mind away as what they have to say won't be written in history books.

Posted via CB10

You forgot Nortel, which everyone is using their patents.

Posted via CB10

[Soumaila Somtore]

Blackberry Passport is still imported in India based on Zauba good for us long.
hey by the way I really love the name you gave to that f**ker at MT.
https://www.zauba.com/import-blackbe...t-hs-code.html

You forgot Nortel, which everyone is using their parents.

Posted via CB10

[bbjdog]

Blackberry Passport is still imported in India based on Zauba good for us long.
hey by the way I really love the name you gave to that f**ker at MT.
https://www.zauba.com/import-blackbe...t-hs-code.html

You just made me **** my pants, now I have to change. Thanks a lot.

So he interviewed 21 people, they must have lived in Alaska. Does anyone here like surveys and how many take the time to answer correctly? I do, and I never tell them where to go, never!

Posted via CB10

[Corbu]

Other parts of the MS report, for those of you who are interested:

Risk Reward
Valuation has moved ahead of business prospects

Investment Thesis
CEO Chen will aggressively cut OPEX to preserve assets, allowing for future optionality.
Pressure will continue to mount on hardware platforms in the form of both lower pricing and lengthening life cycles, with value creation opportunities primarily in software.
Company will be unable to gain relevancy in enterprise mobile management software market and will continue to lose enterprise subscribers.

Key Debates
Can the company stabilize its user base? We are skeptical.
Will the company be able to achieve ~$600 software & messaging revenue in FY16? We think that number is ambitious as it implies significant ramp in subscribers and ARPU.
Is there room for a third or fourth independent player in the MDM/messaging platform market? There are already more advanced vendors in the market with proven solutions for heterogeneous device environments.

Potential Catalysts
Signs of success with its various turnaround initiatives.
Hypothetical strategic value of the MDM/content management business to large enterprise equipment and/or software companies.
Breakeven on hardware business.
Stem losses in subscriber base.

Risks to Achieving Price Target
Management isn’t prepared to further expand operating expense cuts.
Free software, security advantages, and refreshed hardware aren’t sufficient to stabilize the user base.
Liquidation of assets persists at below book values.

Price Target $7
~1.5x Price to Tangible Book Value at the end of FY16e (~5.5x EV/FY16e Software + Messaging Revenue)

Bull $19
2.0x EV/Bull Case CY15e Sales (4x Price to Tangible Book Value at the end of FY16e)

Meaningful traction of new products. New BES 12 platform and BlackBerry devices gain share, dramatically slowing the erosion of the enterprise subscriber base (20% software growth, 15% devices growth). Combined with good response to new BBM monetization efforts, the company is able to return to earnings early in FY16 (first half of calendar 2015). The EV/sales multiple could expand to 2.0x from the current 0.8x as these positives are factored in. The company would no longer trade primarily on tangible book value and instead would start to trade again on growth based metrics.

Base $7
~1.5x Price to Tangible Book Value at the end of FY16e (~5.5x EV/FY16e Software + Messaging Revenue)

Continued cost optimization activities and slowing cash burn. The company arrests its cash burn and moves to cut OPEX further after poor response to its new BES 12 and BlackBerry devices, allowing it to reach and generally maintain cash flow break-even by the end of fiscal 2015 and into fiscal 2016 (early calendar 2015). The company maintains its current asset base, and associated multiple, at 1.5x tangible book value, maintaining turnaround optionality. Grows software & messaging business to a ~$430mm by FY16. 5.5x EV/16e software & messaging revenue comparable to other high growth software names.

Bear $2
0.7x Price to Tangible Book Value at end of FY16e

Failure to enact aggressive cost-cutting measures if new products fail. New management fails to take aggressive cost cutting even as new product launches flounder and subscriber base continues to erode pushing out cash flow break-even indefinitely. Net tangible book shrinks to the $3/share level by the end of May 2016 and the price/tangible book multiple falling with it, to 0.7x, yielding a value of $2.

[bungaboy]

Paying with a smartphone will be the biggest tech trend in 2015: Deloitte

LINDA NGUYEN THE CANADIAN PRESS
Published January 13, 2015 - 9:17am

Paying with a smartphone will be the biggest tech trend in 2015: Deloitte | The Chronicle Herald

TORONTO — More Canadians will be reaching for their cellphones instead of their wallets to pay for purchases this year, predicts a report by global professional services firm Deloitte.

The report, released Tuesday, sees 2015 as a “tipping point” for retailers, banks and telecom companies to adopt the technology, which allows consumers to make relatively small payments within seconds with their smartphones.

Duncan Stewart, a director at Deloitte Canada, said there now are more phone models with the technology, called near field communication, and more retail locations that can accept the payments.

The familiarity Canadians already have with using credit cards to tap and pay, whether in a coffee shop or at the drugstore, will make it easier for consumers to transition to using the same technology with their smartphone.

“They think: ‘If I’m doing it with my credit card, why not do it with my phone? It’s basically the same,” said Stewart.

Deloitte’s annual report named smartphone mobile payments as its top technology trend of 2015 — beating out other emerging trends such as 3D printers, click-and-collect retail locations and the Internet of Things — a term used to describe devices that communicate with each other.

It estimates that, this year, about five per cent of the world’s 600 million equipped smartphones will be used to make an in-store purchase at least once a month, a 1,000 per cent increase over 2014. By the end of the year, it expects one in 20 smartphone owners to have made a mobile payment with their phone.

Although usage will be up, it is not yet “mainstream.”

“It will be a long while before the majority of us can jettison our physical wallets,” said the report, although it noted the attraction of a higher spending limit for such payments using smartphones, around $100 versus $50 for credit cards.

Stewart said adoption will be driven by retailers who see benefits to promoting contactless smartphone payments, such as the ability to process transactions and to integrate loyalty programs and special in-store offers seamlessly.

“The real benefit to the retailer is speed,” he said. “They don’t need to handle cash, or customers typing in a PIN. It moves people through the stores faster.”

But the report also noted that one of the impediments for retailers may be the cost of installing new point-of-sale machines equipped to handle the new technology.

In addition to smartphone payments, Deloitte forecasted that the popularity of physical books will continue its resurgence in 2015 with more consumers demonstrating that they’re still willing to pay for print books after the sales of ebooks plateaued or fell last year in Canada, the U.S. and the U.K.

It also noted that those aged 18 to 34 years will spend an average of US$750 a year on traditional and digital content this year. The report said that translates to nearly US$7 billion in sales for the Canadian media industry for pay TV, music, computer games, books, live sports, streaming video and newspapers.

Deloitte’s report is based on interviews and research conducted with more than 8,000 clients, industry analysts and global leaders from June to December.

[morganplus8]

Just curious what you mean by this

You mean. 20cents EPS or it'll increase from the 9.90 range where it's at right now by 20cents?

Posted via CB10

We have seen, in the past, a good offering of stock on the "ask" but today we aren't seeing that any more. They are hitting the bid and backing away from the trade. We can have a 2:1 ratio of "bids to asks" and the stock still goes down. This isn't typical of a normally trading stock. The news presented above is clearly not helping the stock but we have seen this kind of news used to cover short positions. Morgan Stanley has marked the bottom in the stock on many occasions now. So I can see us popping $ .20/shr on no news; just a weak level of overhead stock in the system. I still think this means we could rally hard on any positive news from Chen. By positive I mean a growth driver and not just some warm feeling about BlackBerry.

[BeowulfTheGeat]

No company is likely leaving or not picking up BlackBerry because they think they enterprise offerings are poor. It's most likely because of uncertainty regarding the future. That's why all four areas are so important at once. They are influence each other. Phone sales influence enterprise attitudes and both indirectly influence BBM and IoT etc. QNX might stand apart, but success in the non-enterprise areas will do nothing but help the enterprise division.

Posted via CB10

[Soumaila Somtore]

I know we all know about this but wanted to share the compilation as I like it.

[La Emperor]

And Mr. Fackette want us to trust his comedy survey. It's options ending Friday this week so be careful with all the BS.

BBRY is here to stay period! It's profitable and ahead of schedule in its turnaround. It's got enough cash to outlast any of Mr Fackette's babies. ( MOBL and Good ).
http://finance.yahoo.com/news/blackb...172147161.html

I trust Chen with his numbers. When he announced his target numbers last year for the upcoming year, you got to think that all of the partnerships proclaimed at the recently concluded CES were already made in advance. Big names lined up at CES to partner with QNX. VW, LG, AUDI, Ford,etc to name a few...a lot of them were new partners. It was not signed a few weeks before. They were done months ahead if not more. So Chen already has some idea and gave us a comfortable figure he can beat with all these partners contributing. I'm surprised MR. Fackette did not mention that in any of his reports...maybe he did but I wont search further.

Chen is a numbers guy. He wont throw in any number in the air just to appease us investors. He has a reputation to take care of. That will be his legacy.

Now going back MOBL and Good. Both companies are losing money in a very crowded market. They are one dimensional . How long will they last? Maybe Mr F should have put that in his survey? 6, 9 or 12 months? Last I heard, Good just laid off more than 10% of their workforce. That's
about says it all.
It's frustrating to see all of of this BS. But having seen and experienced what HALO just went thru, and where it is now, I am confident we will be in the same boat if not better.
GL.

[leejayh]

Hang tight all. Watching stock dip with all of the noise and hit pieces from those with competing interests just means we have to keep our heads about us.

It is going to take time with steady 1 and 2 base hits. Passport, Classic, BES12 will need to carry the next 2 quarters.

And, agree, they need an actual driver to materialize from all of their hard work. It is frustrating to wait, but the traction will start.

The partnerships are there. The distribution is there. All we need is a catalyst.

Posted via CB10

[sidhuk]

alright, thats enough. now go get some green.

[world traveler and former ceo]

Hang tight all. Watching stock dip with all of the noise and hit pieces from those with competing interests just means we have to keep our heads about us.

It is going to take time with steady 1 and 2 base hits. Passport, Classic, BES12 will need to carry the next 2 quarters.

And, agree, they need an actual driver to materialize from all of their hard work. It is frustrating to wait, but the traction will start.

The partnerships are there. The distribution is there. All we need is a catalyst.

Posted via CB10

A successful launch of both Passport and classic in Feb on ATT would be a good start as far as devices and getting back in the minds of buyers in the USA. Hopefully, launching on Verizon in February also...

Posted via CB10

[bigbadben10]

alright, thats enough. now go get some green.

I was waiting patiently for a day like this. Morgan has taught me so much!

[sidhuk]

I was waiting patiently for a day like this. Morgan has taught me so much!

Just made the move 10 mins ago. LoL


Posted using BlackBerry passport.

[La Emperor]

Just sold my Halo so I can join the game. Now I'm extremely overweight in BBRY shares...lol

[sidhuk]

Just sold my Halo so I can join the game. Now I'm extremely overweight in BBRY shares...lol

Seems like heading to 9.50?

Posted using BlackBerry passport.

[La Emperor]

Yup! As Morgan has predicted from his chart earlier. Waiting for the bounce afterwards.....

[chrysaurora]

ONLY OT ALERT!

Hey chrysaurora !!!

I'll talk about two of them at this time. You asked me about XOMA a week or two ago, I believe I said that the sector is on fire and that it is a very good stock, the chart pattern is one that shows a bottom already in the stock and it is ready to move back into the $ 4.25/shr plus area. You bought it for around $ 3.95/shr so you are barely under water in that one so hang onto it and let it make you some money. Not all biotechs rally at the same time so give this one some time.

The next one is THLD - they have decided to go ahead with a complete/expensive study, and that's not a negative, a great company just the same, they have everything they need to rally here despite the fact that they so committed to their drug study. The chart is turning bullish, the stock is closing in on its 200-dma, way above its 50-dma and heading for $ 4.00/shr plus. Again, not all biotechs rally at the same time so wait for this one.

The other two aren't anything I have been talking about so you will have to figure out why you bought them in the first place.
If the stock is not on the Baker Brothers list:
BAKER BROS ADVISORS LLC : Portfolio Holdings | J3SG
you should do some serious research and wonder why the experts don't like them. Having said that, OXGN is about to breakout above its 50-dma and go for a run here, so look at their chart, research their balance sheet to see what cash/debt they have on the books and also look at their product to see if it has legs.

AEZS - not one that I would follow so you have to look into its cash/debt, products and any news that drove it down. The stock is trying to close above its 50-dma and start a rally upward from here.

None of your stocks should be sold right now, you have two poor ones (latter two) and two very good ones that will come back in 2015. Stick with them as they are about to turn positive again. If you do some research on the latter two, come back to me and we'll look at the data. Good luck.

Thanks, Morgan!
I had actually asked about THLD (not XOMA) which I purchased for $3.90. I have a GTC SELL order set for $3.95 (to recover my money + brokerage fee). So, I wondered if I should revise it to something else (like $4.5) if TA says it can get there soon. Or leave it at $3.95

Others (OXGN, AEZS), I wil set them to 3-4 cents higher than my cost price too.

Once money is recovered from these 4 stocks, I want to buy some more BBRY. I think we have just 1 or 2 more quarters to accumulate BBRY. After that BES 12 revenue would start to show up, IoT initiatives will become clearer, new corp of devices (BB Visa etc.) would have been announced and stock would not remain this cheap as it is now. So, over next 3 months, I want to accumulate as much BBRY as I can

[bbjdog]

Reading material

http://investcorrectly.com/20150113/...better-icloud/

Posted via CB10

[BACK-2-BLACK]

I "thanked" Corbu for posting those Morgan Stanley articles.... but definitely did not like the content.

I guess the only good thing that can come about this type of negative publicity is that it creates a buying opportunity for some.

[helopilot06]

Def a dark day for my portfolio


Posted via crackberry10 on my new Z30!

[notafanofyou]

Yea if blackberry was sold to China they would be DOA. No one would do business with them and I would be the first one to get rid of my blackberry device. So maybe you don't like blackberry if that's what you want to happen.

Posted via crackberry10 on my new Z30!

I would rather that then the US steal BlackBerry. BS like today makes me sick and tired of the manipulation

Posted via CB10

[helopilot06]

I would rather that then the US steal BlackBerry. BS like today makes me sick and tired of the manipulation

Posted via CB10

The us is not trying to steal blackberry. The whole market is down so we must hate our own companies too. It's one thing to have an opinion with some sort of factual support but it's another thing to just toss FUD everyday. I'm willing to bet that more than just US investors are shorting bbry.



Posted via crackberry10 on my new Z30!

[donmateo]

Today's been rough on Wall St. Generally up this morning with a steady decline throughout the afternoon. A lot of news and worry in the world which doesn't help matters, despite good news on a specific level per stock.

Here's to hoping we finish strong this week!