[katiepea]

BlackBerry Ltd (BBRY) Ready To Burn $2 Billion

Blackberry is going to burn a pile of cash in the coming months.

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares were given a reasonably positive analysis from Bernstein last Monday, but new information has led Pierre Ferragu, the Bernstein BlackBerry analyst, to change his mind about the company. In a new report, Bernstein downgraded the company to Underperform from Neutral.



The report concentrates on a piece of information that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has only recently made available to the public. A recent filing with the SEC showed that BlackBerry has a much worse cash position than the Bernstein analysts previously estimated. They reckon BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) will burn about $2 billion in cash over the next 6 quarters.

BlackBerry Fairfax failure

The Bernstein thesis is based on the risk of the Fairfax Financial Holdings (TSE:FFH) bid for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) failing. In Monday’s report, the analysts suggested that the chance of that failure was adequately priced in. That made the stock an unattractive prospect for a short. With the new information about the company’s cash position, the chance of failure may have increased.

The new price target on BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) from Bernstein is $4.50 per share. That’s the price at which the company reckons a buyout will become possible if the Fairfax bid fails. BlackBerry lost around 3 million users this quarter, according to the analysts. They expect the company to shed another 7 million users in the coming quarter.

Things are not looking good for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shareholders, and the most recent information appears to increase the chances of a Fairfax Financial Holdings (TSE:FFH) bid failing to secure financing given the new financials. The rival bid for the company may be in similar straits.

Betting on BlackBerry

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares had fallen by more than 2.5 percent on today’s market as of time of writing. The company’s business is failing and only a private bid for the firm is likely to see shareholders come away with some semblance of a return.

The Bernstein report sees costs at BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) being too sticky to reduce easily. That means that BlackBerry is going to burn cash in the coming months. With little chance of any recovery on the way, a bid for BlackBerry may have big trouble securing financing, and the company’s shareholders might be left holding near worthless securities.

_________________

There is slightly more detail on this story in the WSJ
http://blogs.wsj.com/canadarealtime/...view_wsjlatest

The analysts based that conclusion on a reading of financials BlackBerry filed Tuesday with regulators. Bernstein says they revealed the company’s cash position is “far worse” than expected. According to the filing, BlackBerry has $2.9 billion in purchase obligations and commitments, almost all of those coming due in less than a year. About $1.5 billion of those commitments are purchase orders with contract manufacturers, the filing said.

With customers fleeing, working capital stretched and large off-balance-sheet commitments, cash will start burning away, Bernstein said.

______

More on this here: http://blogs.wsj.com/corporate-intel...at-blackberry/

Bernstein’s newfound pessimism follows a note from analysts at Canaccord Genuity last week that also questioned BlackBerry’s cash position using earlier financials. Despite the company’s $2.6 billion in cash, Canaccord only values the net cash at $1 billion because of expected further inventory write-downs, future restructuring costs and significant contractual commitments.

Canaccord doesn’t expect BlackBerry to ultimately pay those commitments in full because of its struggles and shifting business model, but says it is “prudent to discount BlackBerry’s current net cash balance to account for likely cash settlements to close these commitments along with other liabilities.”

FBR raised similar issues this week also pointing to BlackBerry’s purchase commitments.

The new concerns put private equity firm Fairfax’s preliminary $9 a share offer for the struggling handset maker in a new light. Bernstein said the offer has “almost no chance of success and only a cash-rich ‘strategic buyer’ represents an upside risk today.”

Wall Street clearly has some concerns. The stock continues to fall, dropping 3% to $7.70 in midday trading. A month ago, it was around $11. The Wall Street Journal reported Wednesday that distressed-investing specialists including Cerberus Capital Management LP are circling the company.

[minimac1]

Meh, it's gonna be a cold winter over there. At least the money has some use.

Posted via CB10

[katiepea]

Meh, it's gonna be a cold winter over there. At least the money has some use.

Posted via CB10

Cooking meth might be a viable solution to stay alive at this point.

[kfh227]

Analysts 15 years ago said this about apple.

Yawn.



Posted via CB10

[Thunderbuck]

Let's see how they grind out the next couple of quarters. It's probably too much to ask that BB10 adoption matches the dropping of BBOS, but if they can keep growing the numbers there's a chance they can get a more solid footing. We'll see...

[katiepea]

Analysts 15 years ago said this about apple.

Yawn.



Posted via CB10

Not even sort of comparable.

[Bold_until_Hybrid_Comes]

Sad, sad times. Such a shame that this is falling apart and turning out horrendously.

[Taigatrommel]

Analysts 15 years ago said this about apple.

Yawn.



Posted via CB10

This comparision is done quite often. However Apple is not the only example to compare. There are quite some big, traditional companies out there who didn't really make it. Palm is a very prominent example around these boards. What about Commodore? Another example, not this big, would be another (mobile!) computing pioneer: Psion. Psion made very popular handheld PCs like the Psion Series 3, Siena, Series 5 or the Revo. Back when laptops were way too large and too heavy, smartphones and generic PDAs weren't actually available, they packed your office into your pocket. Today the days of their PDA solutions are long gone, instead they are producing industry computing solutions like those handheld devices used by package delivery guys.

One of the latest examples would be Kodak, once a premium brand for cameras and imaging solutions popular around the world, it today is barely a shadow of its former glory. The only stuff they are doing today is business focused imaging and document solutions.


My verdict is I really believe BlackBerry will stay alive, I am more worried in which form they'll be around within the next, say three years. It could very well be that in 2015 BlackBerry will only be a small software company, focused on doing specialized mobile enterprise solutions, done by a few hundrets of employees who are left working for the former smartphone pioneer. I especially doubt they'll catch up to their old strengths within the next years. Early this year, around the time BB10 was launched and the Z10 got released first in UK and Canada, virtually everybody thought BBRY would be able to shift most of their 6.x million quarterly phone sales from BBOS to BB10 later this year. Today, everybody knows these hopes didn't actually turn out that well and BB10 device sales are worse than I guess everybody even imagined. Yet there is nothing in the pipeline which could change the game and I'm pretty sure we'll see even less hardware sales for the next quarter.

[Cashgap]

Analysts 15 years ago said this about apple.

Yawn.

Not even sort of comparable.

Repeated often enough, it takes on it's own life above truth.

Blackberry can just follow the Apple model.

Their dominant single competitor can become a complacent egomaniacal unfocused rent seeker, just as their brilliant founder returns with a fully-developed operating system he's created elsewhere that can be expanded to support fifteen years of desktop, notebook, portable and settop devices.

Then they can be first-movers on something like easy internet connectivity, develop and dominate the digital music market, revolutionize retail, gain unheard of levels of supply chain control and efficiency, gain sustained carrier concessions previously unthinkable and use those concessions to drive the margin out of all competitors but one, and release a half dozen products each of which successively claim the mantle of most profitable consumer electronics devices ever.

Apple did it, Blackberry can surely just do the same thing.

[chr1sny]

Not even sort of comparable.

Why do you say that?

Aren't all struggling tech companies the same? Since Apple was able to turn itself around years ago doesn't it mean it for sure that BBRY will too? Even though Apple offered products outside of the mobile space and even though the smartphone market has matured considerably since then?

[chr1sny]

Repeated often enough, it takes on it's own life above truth.

Blackberry can just follow the Apple model.

Their dominant single competitor can become a complacent egomaniacal unfocused rent seeker, just as their brilliant founder returns with a fully-developed operating system he's created elsewhere that can be expanded to support fifteen years of desktop, notebook, portable and settop devices.

Then they can be first-movers on something like easy internet connectivity, develop and dominate the digital music market, revolutionize retail, gain unheard of levels of supply chain control and efficiency, gain sustained carrier concessions previously unthinkable and use those concessions to drive the margin out of all competitors but one, and release a half dozen products each of which successively claim the mantle of most profitable consumer electronics devices ever.

Apple did it, Blackberry can surely just do the same thing.

The reason why the comparison is ridiculous is because Apple is by far the exception. Just because something is possible doesn't mean that it is likely or even a significant possibility.

[m1a1mg]

Analysts 15 years ago said this about apple.

Yawn.



Posted via CB10

They said it about Palm as well. The difference is, the Palm comparison is more reasonable.

[FFR]

They said it about Palm as well. The difference is, the Palm comparison is more reasonable.

There was a bidding war for palm.
Blackberry isn't comparable.

[markus_13]

This article is basing it's pricing off the fact that the Fairfax deal doesn't go through.. so this is really just crap as they don't know if that will or won't happen.

While negative articles continue on I find this rather dumb. There have been others who currently are looking into BlackBerry as well and the best they will pay is 4.50 a share??? That seems a little crazy since they have more in cash alone

Posted via CB10

[BCITMike]

"Blackberry is going to burn a pile of cash in the coming months."

This to me, implies like 3ish months, maybe up to 6. Not 18 months. It should have said "coming quarters".

[birdman_38]

Cooking meth might be a viable solution to stay alive at this point.

Lmao, they could use one of their shuttered buildings for that.

[anon(4216152)]

Posted via CB10

[qwerty4ever]

Meh, it's gonna be a cold winter over there. At least the money has some use.

Posted via CB10

That's just Thorsten hiding his USD55 million severance package.

[birdman_38]

That's just Thorsten hiding his USD55 million severance package.

He'll need more than one barrel.

[eddy_berry]

BlackBerry Ltd (BBRY) Ready To Burn $2 Billion

Blackberry is going to burn a pile of cash in the coming months.

A recent filing with the SEC showed that BlackBerry has a much worse cash position than the Bernstein analysts previously estimated. They reckon BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) will burn about $2 billion in cash over the next 6 quarters.

6 quarters does not equal coming months. 6 quarters is 1 1/2 years. This article is sensationalist. If BlackBerry recovers losing $2B will be worth it. Not saying it's not true or the WSJ is lying but their is a fine line between lying and bending the truth. They are manipulating their words to make it sound much worse. The rest of the article is based on analyst speculation. Stop listening to this garbage. Question your media people. In North America the media tends to be very biased to get attention.

Edit: fixed my "BlackBerry math"

[Cashgap]

6 quarters does not equal coming months. 6 quarters is 2 1/2 years.

I think I see why we don't all agree...

[BeautyEh]

"Blackberry is going to burn a pile of cash in the coming months."

This to me, implies like 3ish months, maybe up to 6. Not 18 months. It should have said "coming quarters".

Exactly. How the hell do they know what would happen in 6 quarters? Humans might be blown off the planet by then.

Posted via CB10

[BeautyEh]

Let's see how they grind out the next couple of quarters. It's probably too much to ask that BB10 adoption matches the dropping of BBOS, but if they can keep growing the numbers there's a chance they can get a more solid footing. We'll see...

If their numbers are to be believed, are 9 million BlackBerry users switching to a different platform in the next 3 months? Based on approx. 6 million BB phones being sold, whether OS 7 or 10 it's still a BB device. Do they know that for certain? Does Kantar know that?

Posted via CB10

[Pilchard]

Let's see how they grind out the next couple of quarters. It's probably too much to ask that BB10 adoption matches the dropping of BBOS, but if they can keep growing the numbers there's a chance they can get a more solid footing. We'll see...

Hey TB, I was wondering how you would take the headlines about cash burn as we have commented on each other's posts recently on the subject of BB's viability. I think the latest numbers have dulled down your optimism a little and you are now in wait and see mode. I think the latest numbers are so horrendous the odds on BB reaching any sort of firm footing are very slim indeed. My gut feeling is the Fairfax deal won't happen (pension funds are not high risk investors and these seem to be the source of the capital) and the snippets we read about discussions with Google et al is more about picking over the carcass.

I really hope I am wrong as I wish nothing but the best for Blackberry, but companies very rarely escape from the situation they are in. If Microsoft had not bailed out Apple there would be no Apple.

[Wiki Cydia]

If Microsoft had not bailed out Apple there would be no Apple.

That's a bit of a stretch. Sure, the funds received from MS were helpful, as it kept the company operating at a time when it was cash poor. But the odds are that had MS not invested, some other investor would have done something. The terms would have been different, because the investor would have been more concerned about making money than Microsoft was, but they're likely would have been some additional capital from somewhere.