The Market Ticker
Commentary on The Capital Markets- Category [Earnings]

The results are interesting this morning.... let me give you my 30 second view of it.

  • Cost control remains strong.  This is a big deal; if you run out of money you lose.  Remember that the bears have said BlackBerry would be out of cash and broke by now.  They're not.  Chen has done an incredible job at cost containment and execution.

  • BES10 and upcoming BES12, along with BB10, have major and recent (last few days) wins.  ATO and now full operational clearance have been obtained for the pair (BB10 & BES10) on DOD networks.  Nobody else has that right now among "modern" devices.  Be careful with competitor claims in this regard and ask for the errata.  There are none on the BlackBerries.  This is a very significant win and is being ignored at the present time.

  • BES12 addresses the major complaint of BES10.  Specifically, that older phones require the older BES service be maintained.  BES12 integrates the old and new, plus Android and iPhone management, into one platform.  Again, BlackBerry is the only company that can do this today.

  • The BB10 device software continues to evolve.  10.2.1 is very nice, fast, stable and Android compatibility has been greatly enhanced.  An early 10.3 leak has shown up and it looks promising too.  I still want to see unrestricted S/MIME support Mr. Chen; this is important and one of the items you need to address here and now for the small business market.

  • The new Z3, an inexpensive $200 phone, is a potential game-changer.  First targeted at Indonesia the de-contenting is minor compared to the price shift.  It was also confirmed today that an LTE version is coming; Indonesia doesn't have LTE at all, but the fact that they're going to build one means that this phone will almost-certainly show up in Europe and the US.  A $200 full-featured prepaid device with BB10 via prepaid services like StraightTalk in WalMart would sell like crazy, considering that it can run Android apps as well as BlackBerry apps.

There are no "sure things" in this game but I am rather impressed with the economic performance and the fact that the company continues to execute.  There are revenue opportunities in BBM and BES12 that, if realized, are going to make this company look extraordinarily cheap; today's price is just over 1x sales off the present quarter.

Chen can fail to execute on the forward path but if he hits on BES12 and the entry-level phones I'm of the opinion that they will hit their metric of turning an honest net profit by the first quarter of next year, and the company will handily get there with the cash on hand.

If you're short the stock here you're betting that Chen whiffs all three of the balls in play -- BES12, the lower-priced handsets being introduced next month in Indonesia and BBM.  If he hits one, the company is stable and your bet is a loser, given the borrow fees.  If he gets even base hits on two of them IMHO the stock is undervalued by half and if you're short, you're dead.

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