On Nov 11, 2014, we issued an updated research report on BlackBerry Ltd (TO:BB).
BlackBerry delivered positive earnings surprises in three quarters last year, with an average beat of 46.89%. The company reported narrower-than-expected loss in the second quarter of fiscal 2015 wherein the bottom line surpassed the Zacks Consensus Estimate while the top line was on par with the same.
By offering a convenient, reliable and secure way of accessing email in real time, BlackBerry has been able to successfully differentiate its products from the other offerings in the communications market. The company enjoys a strong brand value in the wireless PDA market, leveraging the popularity of its push email system. Further, BlackBerry holds 2,033 patents ranging from mobile security to push email in high-end smartphones. Its extensive patent portfolio is also expected to help in further innovation.
A major growth product for BlackBerry is its BlackBerry Enterprise Service 10 (BES10) solution. This is a cross-platform product interoperable with Apple Inc.’s iOS and Google Inc.’s Android. BES10 provides flexibility, scalability, high security and cost-effectiveness to its customers. Recently, the company also launched the BES12 platform.
BlackBerry is actively targeting the highly populated markets of China and India. The company expects its enterprise service business to witness strong growth in these countries owing to the high demand for efficient communication system security in the corporate sector.
The company also initiated the shipping of budget friendly full-touch Z3 smartphones. Z3 is a joint effort by BlackBerry and Foxconn Intl Hldg (HK:2038) – which will supply cheaper inventories for the manufacturing of the smartphones. Such a strategic move will help the Canadian device maker to improve margins along with capitalizing on the booming smartphone market of Indonesia and other emerging nations. Recently, BlackBerry received a phenomenal 200,000-order for its latest large screen smartphone, Passport.
However, in the second quarter of fiscal 2015, BlackBerry sold 2.4 million smartphones, down 44% year over year and also significantly below Samsung’s 78 million and Apple’s 39 million. This indicates that the company’s trouble in the high-end smartphone business persists.
BlackBerry is rapidly losing its leadership position in the corporate segment which is characterized as high-margin since business executives generally opt for expensive smartphones. BlackBerry is also striving to cater to the retail consumer segment but has failed to do so as its software remains uncompetitive with respect to application-friendly features of iOS and Android.
BlackBerry currently has a Zacks Rank #2 (Buy). Another well-performing company worth considering in this sector is SK Telecom Co. Ltd. with a Zacks Rank #1 (Strong Buy).