BB - BlackBerry

[TwoCitiesCapital]

http://www.fiercewireless.com/story/blackberry-bets-security-privacy-set-priv-apart-question-whether-consumers/2015-11-03

From a consumer's standpoint I think this will be more of a test of whether people like the hardware package that Blackberry has put together (basically the slide out keyboard). It will also be a test of how their corp/gov customers react to Android (although interestingly the corp/gov market for BBRY keeps shrinking). It doesn't seem like consumers are worried about security on their phone. Personally, I'm concerned about security at the app level (bank apps) mainly.

 

Yea - I would have thought that the Snowden revelations, celebrity phone hacks, and the constant realization that technology isn't as safe as we thought (in terms of secure applications, etc.) would have driven consumers to give Blackberry another look.

 

I'm not necessarily baffled that people aren't buying the phones - just more baffled that there has been complete disinterest in them. Personally, I ended up choosing the Note 4 over the Passport, but that was largely because 1) the Passport wasn't available on Verizon at the time and 2) I use Google Apps like Inbox, Maps, Now, Sheets, ChromeCast, etc. for just about everything and didn't want the headache of porting them over.

 

It doesn't seem like most consumers are even considering Blackberry phones, let alone choosing them over other options. It's certainly frustrating as a shareholder, but we'll see.

 

 

[JayGatsby]

I think the app headaches made them a non-starter for 99% of consumers. I thought about the Passport as well, really liked the hardware, but there was just too much headache with trying to get apps to work that made it not worth it. I really don't care what OS I'm running as long as it has the apps I need. Without Google Maps I'm pretty much lost and I don't like the Waze interface. With Android they'll at least be starting on a level playing field.

 

I talked to someone recently on a plane who did phone security. He said the big focus now is on app security. Companies like BofA or Apple iCloud are hypersensitive to potential security breaches through their apps and are willing to spend big money to prevent them. People don't care us much about the phone itself (part of the problem with the MDM business). Just hearsay from one person, but it sounded like a reasonable argument.

[karthikpm]

http://www.marketwatch.com/story/blackberry-is-back-but-do-investors-know-it-2015-11-12

[JayGatsby]

This was interesting: http://crackberry.com/blackberry-vienna

 

Kind of bizarre looking device, but interesting that they have more in the pipeline. Reception to the Priv seems pretty good, although there's historically a bit of a cult following that gets excited about the new devices before sales fall flat.

[TwoCitiesCapital]

Supposedly had a solid launch for the PRIV

 

http://learnbonds.com/125588/blackberry-ltd-priv-had-a-solid-launch-analyst/

 

We'll find out in a week, but if 900k is right, there is the possibility that we see breakeven hardware in the future which would be a very positive thing. I know the U.S. isn't full of blackberry fanatics, but it's only AT&T here too meaning that further device sales could come from Verizon, T-Mobile, and Sprint at a future date.

[JayGatsby]

There's so many different products and business lines it's hard to tell what is/isn't working but it seems pretty positive on almost all fronts: http://seekingalpha.com/article/3765276-blackberrys-bbry-ceo-john-chen-on-q3-2016-results-earnings-call-transcript

 

[Guest bksimon]

I like that Chen does not seem wedded to keeping the phone business. I'm reading a history of BlackBerry now (Losing the Signal) and it seems precisely the sentimentality about past successes that led RIM to the brink of disappearance. He said there are "strategic options" which I take as a hint that if the handset business doesn't pan out he could sell it but keep software and services. (To Samsung or Microsoft, perhaps.)

[valueorama]

I like that Chen does not seem wedded to keeping the phone business. I'm reading a history of BlackBerry now (Losing the Signal) and it seems precisely the sentimentality about past successes that led RIM to the brink of disappearance. He said there are "strategic options" which I take as a hint that if the handset business doesn't pan out he could sell it but keep software and services. (To Samsung or Microsoft, perhaps.)

 

I dont think there are any buyers. Canada is not going to give up control over a security company. Lenovo was brushed off a year or two back, so samsung is out. Maybe Microsoft, but it is a stretch.

[Ballinvarosig Investors]

Looks like Blackberry have finally decided to put Blackberry OS out of its misery.

 

http://www.engadget.com/2016/01/07/blackberry-android-devices-2016/

 

At last Blackberry have finally done the right thing, but it shouldn't have taken this amount of time to take this decision. 5 years ago when this thread started, a few of us correctly said that BBOS would be a failure, the Playbook would be a failure, and that the company need to refocus their effort on security and messaging (albeit as a smaller entity).

[TwoCitiesCapital]

Looks like Blackberry have finally decided to put Blackberry OS out of its misery.

 

http://www.engadget.com/2016/01/07/blackberry-android-devices-2016/

 

At last Blackberry have finally done the right thing, but it shouldn't have taken this amount of time to take this decision. 5 years ago when this thread started, a few of us correctly said that BBOS would be a failure, the Playbook would be a failure, and that the company need to refocus their effort on security and messaging (albeit as a smaller entity).

 

For starters, this isn't a definitive announcement they are getting rid of BB10. Secondly, they probably should but it's unfortunate - BB10 actually did have some superior characteristics upon its release. I've been an Android fan for years and loved the gesture based navigation and the hub system. I thought the separation of the work-side/personal-side of the phone was brilliant as most people I knew hated carrying two phones.

 

It was just too little, too late for a phone company that had already lost 90% of its users, but it was a great product.

[JayGatsby]

Chen said the delay in releasing an Android device was largely because it took time for them to develop all the proper security overlays. Having said that, they probably could have come to market with it sooner if it was more of a focus. I hear good things about BB10 but the OS is just a launching pad for apps and if there are no apps the whole exercise was pointless.

 

Seems like the announcements recently have been positive. Priv seems to be selling as well as one could hope. Good integration positions that unit for profit and shows customers that they're serious and have staying power. QNX is doing some cool stuff and may or may not make money from that in the future.

[zenith]

from S-1 regarding the IPO of Nanthealth

 

 

On March 31, 2014, the Registrant issued and sold to Blackberry Corporation an aggregate of 3,572,066 Series D units pursuant to a purchase agreement at a price of $2.7995 per unit for an aggregate purchase price of $10.0 million. The two companies are collaborating on the development of HIPAA-certified integrated clinical systems that transform the delivery of medical care.

[TwoCitiesCapital]

from S-1 regarding the IPO of Nanthealth

 

 

On March 31, 2014, the Registrant issued and sold to Blackberry Corporation an aggregate of 3,572,066 Series D units pursuant to a purchase agreement at a price of $2.7995 per unit for an aggregate purchase price of $10.0 million. The two companies are collaborating on the development of HIPAA-certified integrated clinical systems that transform the delivery of medical care.

 

I was actually hoping that the investment had been larger :/

 

$10M is hardly enough to move the needle...

[JayGatsby]

Isn't the real opportunity f they can leverage Nant to become the/a leader in healthcare IoT? That seems like that what Chen was going for.

[TwoCitiesCapital]

Isn't the real opportunity f they can leverage Nant to become the/a leader in healthcare IoT? That seems like that what Chen was going for.

 

That is absolutely the real opportunity, but when it was announced that they had taken a position within the company as well in facilitating that partnership, I was hoping it'd at least be a meaningful stake that could make a difference to the bottom line going forward.

[zenith]

The stake in Nanthealth is small, but the apps they may create could potentially have value for Nanthealth.

In addition, they are going to swap all of their 2020 6% converts (1.25B) into longer term debt that is at a much lower rate. They may swap out about 1B and buy back 250M outright as they will be close to the 2.5B the John Chen wants to maintain. I spoke to them and they confirmed that they are swapping the debt, I am assuming that they buy back the 250M add on that Prem took a few months after the initial 250M in November 2013.

In related news it looks like Qatar and Brookfield sold out of their converts and Canso and Manulife bought them. So now Fairfax still has 500M and Canso has 369M, of the 1.25B

The ytc must still be decent as they have to know they are going to call these. Canso, as a value shop in canada always takes these down as this is in their wheelhouse. Their track record is solid.

[Granitepost]

BlackBerry to sell $605M in new debentures to Fairfax, other investors Aug 26 2016

 

http://www.bnn.ca/blackberry-to-sell-605m-in-new-debentures-to-fairfax-other-investors-1.555845

 

 

 

 

[TwoCitiesCapital]

BlackBerry to sell $605M in new debentures to Fairfax, other investors Aug 26 2016

 

http://www.bnn.ca/blackberry-to-sell-605m-in-new-debentures-to-fairfax-other-investors-1.555845

 

 

Interesting. I know they mentioned they would buying back debt, but wasn't expecting a de facto debt exchange. Wonder what they're paying to make investors accept the lower coupon on $605M so they can buy back $1.25B at 6%.

[JayGatsby]

Wonder what they plan to do with the cash? I'd assumed they'd redeem the notes in full with cash.

 

I guess it's a good sign that Fairfax is taking 3.75% notes at a $10 conversion. If they really liked what they saw I guess they'd just buy shares at $8? Maybe there's some restrictions.

[TwoCitiesCapital]

Wonder what they plan to do with the cash? I'd assumed they'd redeem the notes in full with cash.

 

I guess it's a good sign that Fairfax is taking 3.75% notes at a $10 conversion. If they really liked what they saw I guess they'd just buy shares at $8? Maybe there's some restrictions.

 

They still hold quite a bit of shares and $500M of the converts. I'm actually happier that they're taking the bonds to increase any potential equity exposure as the turnaround still isn't quite here yet.

 

If they're right, BBRY will be significantly more than $10 meaning the $2 a share they miss out on isn't a big deal. If they're wrong, they'll probably still make out alright on the bonds.

[JayGatsby]

Wonder what they plan to do with the cash? I'd assumed they'd redeem the notes in full with cash.

 

I guess it's a good sign that Fairfax is taking 3.75% notes at a $10 conversion. If they really liked what they saw I guess they'd just buy shares at $8? Maybe there's some restrictions.

 

They still hold quite a bit of shares and $500M of the converts. I'm actually happier that they're taking the bonds to increase any potential equity exposure as the turnaround still isn't quite here yet.

 

If they're right, BBRY will be significantly more than $10 meaning the $2 a share they miss out on isn't a big deal. If they're wrong, they'll probably still make out alright on the bonds.

I guess they want to keep a cash pile ready for acquisitions? Given the changes they've made to their hardware business (outsourcing the hardware) the risk of large cash losses seems fairly remote.

[JayGatsby]

Is anyone still following this? Fairfax apparently now owns 17% of the common (http://www.streetinsider.com/SEC+Filings/Form+SC+13DA+BLACKBERRY+Ltd+Filed+by%3A+FAIRFAX+FINANCIAL+HOLDINGS+LTD+CAN/12019786.html). After the recent earnings I was leaning toward selling my position, but reconsidering given Watsa is on the board and bought more shares with the proceeds from the debt refi.

 

Trying to piece together where the value lies.. as I look at all the pieces (brand/software licencing, MDM, QNX, residual SAF, radar, patents) I don't see a clear driver to really build equity value. Their MDM position is good but it's a super competitive market. My original thesis was lots of option value Chen at the helm with downside protection from the patents. Chen still seems like a good CEO, but the amount of smoke and mirrors in the press releases bothers me ("100%+ YoY software growth!")

 

EDIT: The was also the share repurchase which was less than announced but was ~3% of shares. Not huge but just seems like management / the Board (Watsa) is pretty bullish at a time when from an outsiders perspective it's not very rosy.

[muscleman]

http://www.marketwatch.com/story/blackberry-stock-revs-up-on-ford-deal-2016-11-01

 

QNX is already in 60 million cars. Can it play a vital role in driverless cars?

I still don't see a clear value creation path or why BBRY is undervalued right now, but this seems interesting.

[zenith]

Update on value for BBRY.

Based on some recent mgt commentary (analyst day), the revenues for QNX are likely to go from 140M to more than 400M - 460M in the next 1.5 to 2 years. the reason is the 30M or so cars globally and  they get an average of about $4 to $5 per car, will increase to more than $12 to $15 and will grow at around 40 - 50% after that. On this alone I would value at about the current price of $7 a share. If RADAR, currently being tested in FEDEX, UPS, Walmart and others can be game changer if adapted vs. established competitors like ID Systems and others.

They have modified the box that goes on the trailer trucks to a smaller unit for the actual fedex delivery trucks and the security is unmatched as is the easy interface.  This business is worth about 2 to 3X sales.

If we look at RADAR, they charge anywhere from $25 to $30 a month per trailer, plus an upfront fee of about $200 to $300 for the actual box, I assume in my numbers they can eat this upfront cost, and for larger customers, just charge the monthly subscription with a 5 year contract, as they will get this back in less than a year. For larger customers such as Walmart with over 70,000 trailers the contract size would be between 15 - 17M over the next as they ramp up, per year from one customer. if they land additional large customers, the numbers grow exponentially. Based on the Verizon deal where they acquired Fleetmatics for 2.4B last year, this space is ripe for M&A.

 

While the EMM business has a similar valuation to say MOBL, the rest of the business deserves a nice premium as the growth is more than the 10- 15% in EMM.

 

Overall, this company has many hedge funds currently short as they believe this is "dead money" and wont cover until they see actual revenue growth. That part may be coming in the next quarter or 2. The risk of Bk is extremely low as the contractual obligations for HW have been entirely offloaded to TCL, with only a hundred thousand or so units (mainly DTEK 50 and 60, as well as some PRIV, and legacy blackberry 10 devices remaining in inventory and they have been written down last quarter. The engineers that were shifted to Ford are largely duplicated positions and not the core QNX team as well as the lawsuit as really  little to no merit.

I think the value of this company is very misunderstood by most that follow the company, but the current price reflects all of that and provides a 2 to 3x return over the next 2 years as well

[A_Hamilton]

Update on value for BBRY.

Based on some recent mgt commentary (analyst day), the revenues for QNX are likely to go from 140M to more than 400M - 460M in the next 1.5 to 2 years. the reason is the 30M or so cars globally and  they get an average of about $4 to $5 per car, will increase to more than $12 to $15 and will grow at around 40 - 50% after that. On this alone I would value at about the current price of $7 a share. If RADAR, currently being tested in FEDEX, UPS, Walmart and others can be game changer if adapted vs. established competitors like ID Systems and others.

They have modified the box that goes on the trailer trucks to a smaller unit for the actual fedex delivery trucks and the security is unmatched as is the easy interface.  This business is worth about 2 to 3X sales.

If we look at RADAR, they charge anywhere from $25 to $30 a month per trailer, plus an upfront fee of about $200 to $300 for the actual box, I assume in my numbers they can eat this upfront cost, and for larger customers, just charge the monthly subscription with a 5 year contract, as they will get this back in less than a year. For larger customers such as Walmart with over 70,000 trailers the contract size would be between 15 - 17M over the next as they ramp up, per year from one customer. if they land additional large customers, the numbers grow exponentially. Based on the Verizon deal where they acquired Fleetmatics for 2.4B last year, this space is ripe for M&A.

 

While the EMM business has a similar valuation to say MOBL, the rest of the business deserves a nice premium as the growth is more than the 10- 15% in EMM.

 

Overall, this company has many hedge funds currently short as they believe this is "dead money" and wont cover until they see actual revenue growth. That part may be coming in the next quarter or 2. The risk of Bk is extremely low as the contractual obligations for HW have been entirely offloaded to TCL, with only a hundred thousand or so units (mainly DTEK 50 and 60, as well as some PRIV, and legacy blackberry 10 devices remaining in inventory and they have been written down last quarter. The engineers that were shifted to Ford are largely duplicated positions and not the core QNX team as well as the lawsuit as really  little to no merit.

I think the value of this company is very misunderstood by most that follow the company, but the current price reflects all of that and provides a 2 to 3x return over the next 2 years as well

 

Interesting thoughts. What investor day are you referring to? Chen's comments at the annual shareholder meeting last June?