BB - BlackBerry

[Guest valueInv]

CC transcript:

http://seekingalpha.com/article/1909681-blackberry-ceo-discusses-f3q14-results-earnings-call-transcript?part=single

 

Takeaways from earnings release and CC:

 

-Hardware sell-throughs continue to decline and will likely decline for the next couple of quarters

 

-Break-up value continues to march downwards with cash burn, though that could stabilize in Q3 as required intangible acquisitions and capex purchases are drastically reduced at that time

 

-Intangible assets write-downs related primarily to prepaid licensing agreements (not patents or NOC)

 

-Goal for devices is to stabilize and manage to break-even (Foxconn manufacturing partnership is an example of action to achieve this).  After that occurs, Chen will evaluate what to do with that biz.  He expressed interest in possibly going forward with breakeven/low-margin device biz intended to drive monetization of BBRY software and services.

 

-Main focus will be on QNX and BES for profitability.  Specifically, the strategy will be to focus on security and secure communications for mobile, M2M, and payments.  Per user, per month base revenue model for enterprise who uses BES.  Also working on adding options that customers can purchase on top of base server (e.g., enterprise BBM for compliance and audit functionality)

 

-BBM will continue to be built out, but no clarity yet on how to fully monetize that, though they are exploring advertising model

 

-QNX continues to be crown jewel for mobile and M2M future, and BBRY is finally working on spreading it verticals other than automotive.  Also building a cloud-based platform for M2M communications.

 

-----

 

John Chen is legit.  It's nice to have some competency at the C-Suite.

 

Yeah,  I read his statements. It's the same old smoke and mirrors that we have seen from BBRY. Other than some reorganizing and repackaging, there is little new.

[Guest valueInv]

I just don't understand how the Foxconn agreement warrants a rally in the stock. They reported a disastrous quarter.

 

Every time they report a bad quarter, it becomes harder for their salespeople to close deals. It is a vicious circle.

[Guest wellmont]

they found a better "salesman" than TH.

[Guest valueInv]

]

-QNX continues to be crown jewel for mobile and M2M future,

 

 

You mean the best house in a crappy neighborhood.

[txlaw]

I just don't understand how the Foxconn agreement warrants a rally in the stock. They reported a disastrous quarter.

 

Could just be short covering rather than market approval of Foxconn agreement. 

 

Chen demonstrated on the CC that he gets what BBRY needs to do to maximize the value of its assets.  He also gave a timeline for when capex and intangible purchase will be drastically reduced, which gives more clarity on cash burn.  So why not cover now and then get short again at a valuation that is more of a no-brainer (according to anyone who wants to short BBRY). 

 

Note that BBRY definitely had a terrible quarter, as per usual, but a lot of the headline number was related to inventory and intangible write downs, rather than to cash burn.

[txlaw]

they found a better "salesman" than TH.

 

Disagree.  This is the first time they've really articulated a strategy that will maximize the value of their assets.

 

Chen seems to be more pragmatic and realistic than Thorsten Heins.  Turnaround guy, rather than salesman.

[Guest wellmont]

So when you posted that video of TH giving his vision of the future of mobile you were actually warning us?

[Guest wellmont]

I just don't understand how the Foxconn agreement warrants a rally in the stock. They reported a disastrous quarter.

 

Could just be short covering rather than market approval of Foxconn agreement. 

 

Chen demonstrated on the CC that he gets what BBRY needs to do to maximize the value of its assets.  He also gave a timeline for when capex and intangible purchase will be drastically reduced, which gives more clarity on cash burn.  So why not cover now and then get short again at a valuation that is more of a no-brainer (according to anyone who wants to short BBRY). 

 

Note that BBRY definitely had a terrible quarter, as per usual, but a lot of the headline number was related to inventory and intangible write downs, rather than to cash burn.

 

that's because bbry didn't make it easy to figure out the cash burn. it was "not insignificant".

[Guest valueInv]

I just don't understand how the Foxconn agreement warrants a rally in the stock. They reported a disastrous quarter.

 

The market thinks JC is better looking than TH

[Guest valueInv]

they found a better "salesman" than TH.

 

Disagree.  This is the first time they've really articulated a strategy that will maximize the value of their assets.

 

 

So all those theories you posted in this thread were your own concoctions instead of anything articulated by management?

[txlaw]

So when you posted that video of TH giving his vision of the future of mobile you were actually warning us?

 

No.  No engaging in revisionist history for me.

 

You probably do not recall, but I posted that video without having already watched it (I believe it was one of the first long interviews he gave after taking the CEO position).  And then when I did watch it, I commented that I thought Heins' articulated vision re: computing -- that the OS was commoditizing and that at some point all the local computing power you need would be in your phone, rather than in multiple devices -- was spot on.  And that this might bode well regarding the C-Suite's strategic vision and their execution on a turnaround/transformation focused on software and services.  (And, btw, I still believe in what I call the Ubuntu Edge vision, the commoditization of the OS, and the need to focus on software and services rather than device sales.)

 

See http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/rim-research-in-motion/msg114545/#msg114545

 

But it turned out that this vision and the ability to execute did not go hand in hand.  And that TH was responsible for some very poor decisions made that burned more than a $1 billion worth of capital.  So was I warning board members about TH, as you so snidely put it?  No, I was not. 

 

Btw, you were always criticizing how BBRY management never talked about M2M or their vision for QNX on their CCs.  Now that they actually are, of course you are saying that it's just salesmanship.

[Guest wellmont]

they have nothing else to "sell". their core business is kinda devastated. what else can they talk about? the next great bb10 smartphone? part of understanding an investment is figuring out if the vision, the salesmanship, can actually be executed. maybe third time's a charm for bbry and chen is the "answer". think of this company as a start up that is still printing losses. hey start ups are good right now. because investors buy the sizzle and not the "steak".

[Guest valueInv]

they have nothing else to "sell". their core business is kinda devastated. what else can they talk about? the next great bb10 smartphone? part of understanding an investment is figuring out if the vision, the salesmanship, can actually be executed.

 

Before you even get to execution, you need to figure out if the vision is even realistic and feasible.

[Guest wellmont]

they have nothing else to "sell". their core business is kinda devastated. what else can they talk about? the next great bb10 smartphone? part of understanding an investment is figuring out if the vision, the salesmanship, can actually be executed.

 

Before you even get to execution, you need to figure out if the vision is even realistic and feasible.

 

precisely. the th vision was neither realistic or executable. the current vision can make sense only if you can suspend disbelief and imagine that bbry is a start up that may eventually have something in a few years.

[txlaw]

they have nothing else to "sell". their core business is kinda devastated. what else can they talk about? the next great bb10 smartphone? part of understanding an investment is figuring out if the vision, the salesmanship, can actually be executed. maybe third time's a charm for bbry and chen is the "answer".

 

That's just wrong.  Chen's articulated vision is appropriate and is the right one to maximize the value of BBRY's valuable assets.  It is the vision that I have been advocating for a while now on this thread, which is the basis for my belief that BBRY's assets have value.

 

I have been talking about IoT (branded as the "Internet of Everything" by Cisco) and M2M communications on this board for a long time now -- as early as 2010, in the context of an LVLT discussion.  Now these terms are well understood by the Street, and most people buy into the notion that these are more than just buzzwords.  At some point, I eventually began to explain why I thought BBRY's assets fit pretty well into that future. 

 

Now, you are absolutely correct that execution is vital.  That's why we have to figure out whether John Chen is legit or not.  You seem to think he's just a salesman and that they have nothing there.  I argue to the contrary that Chen seems to be more than just a salesman.  And that they do indeed have something to sell -- if they can get on the ball and actually execute.

[txlaw]

they have nothing else to "sell". their core business is kinda devastated. what else can they talk about? the next great bb10 smartphone? part of understanding an investment is figuring out if the vision, the salesmanship, can actually be executed.

 

Before you even get to execution, you need to figure out if the vision is even realistic and feasible.

 

precisely. the th vision was neither realistic or executable. the current vision can make sense only if you can suspend disbelief and imagine that bbry is a start up that may eventually have something in a few years.

 

On the contrary, the vision of their assets playing a vital role in enterprise-focused MDM, IoT, and M2M is both realistic and executable. 

 

What has happened with BBRY over the last couple of years is that they have simply executed poorly.  They have exhibited classic death spiral behavior, as described in The Innovator's Solution.  And the public capital markets have punished them for it in a way that has actually affected their attempts to transform.  That's why PW tried to break the cycle by taking BBRY private.

 

That's also why I have always suggested break-up value for BBRY.  Because I could definitely see it coming to a point where they simply had to sell their good assets to entities that could utilize them optimally.

 

But now we have a situation where BBRY will still try to do it themselves.  So it's on Chen and the C-Suite to prove themselves.  Maybe they will, maybe they won't.  But Chen at least understand where he must try to go with this endeavor.

[Guest valueInv]

they have nothing else to "sell". their core business is kinda devastated. what else can they talk about? the next great bb10 smartphone? part of understanding an investment is figuring out if the vision, the salesmanship, can actually be executed.

 

Before you even get to execution, you need to figure out if the vision is even realistic and feasible.

 

precisely. the th vision was neither realistic or executable. the current vision can make sense only if you can suspend disbelief and imagine that bbry is a start up that may eventually have something in a few years.

 

On the contrary, the vision of their assets playing a vital role in enterprise-focused MDM, IoT, and M2M is both realistic and executable. 

 

 

My a*s it is. They're hyped up buzzwords. All BBRY has is an embedded RTOS which they claim is suited for IoT. An understanding of the market will tell you that it is just one of many OSes with most other options available for free - not an indicator of success. The fact that JC is claiming QNX to be the crown jewel tells me he's full of it.

 

Many other players including IBM, Qualcomm, Samsung, Apple and Google are already ahead of them with IoT products already . BBRY has not even released an IoT or M2M product yet, leave alone succeeding in the market while downsizing and hiring a new team. All we have are slide ware and statements from management. In other words, smoke and mirrors.

[tengen]

Apparently BBRY burned through $1.1-billion of their $2.6 billion cash pile since the end of the second quarter. So much for including cash in the breakup value of the company. Now we know why they rushed out to raise $1 billion.

[Liberty]

http://www.cbc.ca/news/canada/kitchener-waterloo/blackberry-co-founder-mike-lazaridis-sells-26m-us-in-shares-1.2476040?cmp=rss

[fareastwarriors]

http://www.bloomberg.com/news/2013-12-24/blackberry-former-ceo-lazaridis-cuts-stake-in-smartphone-maker.html

 

BlackBerry Founder Walks Away From Possible Takeover Deal

[fareastwarriors]

BlackBerry: The way forward

 

 

http://www.cnbc.com/id/101300396

[Guest valueInv]

http://gigaom.com/2014/01/05/belkin-expands-wemo-line-with-connected-lightbulbs-and-wi-fi-based-presence/

http://venturebeat.com/2014/01/05/check-out-the-crazy-99-connected-electric-toothbrush/

 

QNX anywhere?

[txlaw]

Now, this is a big deal:

http://www.businessweek.com/articles/2014-01-06/google-teams-with-gm-honda-and-audi-to-bring-android-to-cars

 

How will John Chen address the hardened Linux threat to its QNX Embedded biz?  They need to demonstrate that they've been working on developing that asset at CES.  And they need to start talking about how they will monetize that asset as well.   

[Guest valueInv]

Now, this is a big deal:

http://www.businessweek.com/articles/2014-01-06/google-teams-with-gm-honda-and-audi-to-bring-android-to-cars

 

How will John Chen address the hardened Linux threat to its QNX Embedded biz?  They need to demonstrate that they've been working on developing that asset at CES.  And they need to start talking about how they will monetize that asset as well. 

 

This was the one vertical that QNX actually made inroads on. And now iOS and Android are moving in.

[Guest wellmont]

Now, this is a big deal:

http://www.businessweek.com/articles/2014-01-06/google-teams-with-gm-honda-and-audi-to-bring-android-to-cars

 

How will John Chen address the hardened Linux threat to its QNX Embedded biz?  They need to demonstrate that they've been working on developing that asset at CES.  And they need to start talking about how they will monetize that asset as well. 

 

we talked about this months ago on the thread when RTOS/QNX was discussed. I argued Android would win everywhere, and that QNX was basically a RTOS, most of which were free. You argued that QNX would win, and in fact, increase it's presence in numerous applications. Since then QNX has lost it's tiny position on phones, and is now under seize in it's stronghold.