"CEO John Chen's downsizing and enterprise/software focused strategy's pragmatic, but we're still cautious on his ability to successfully turn around the business," Kidron wrote in a note. "Despite operational changes, we expect BlackBerry's device shipments and subs to erode quickly before stability is achieved with the new strategy."
Given the rockiness and volatility surrounding the company, as well as the stock, Chen's plan to save the company, which includes a get back-to-basics strategy, involves a lot of execution risk, according to Kidron, who titled his note, "Sell the "Dream," Face "Reality"; Downgrading." He noted that even if Chen and his management team are successful "BlackBerry would likely exit much smaller and a niche player."
"We see a disconnect in what is likely to be a challenging, multiple-year reclamation project, and investors' more typical multi-quarter bottom-line view. We believe the mismatch will eventually weigh on the shares," Kidron wrote in the note.
Chen, who successfully turned around Sybase, has a "good track record," according to Kidron, and he's "tapping a management team he's successfully worked with in the past in turning around and selling Sybase."
For now though, Kidron is warranting caution at these levels. He said that investors may be "reminded of the 'reality' through the year, shaking confidence. Sell ahead."