BlackBerry Priv Receives Analysts’ Love, But Can It Save BlackBerry?

  • BlackBerry Priv, the company's first Android smartphone, has been receiving positive reviews from analysts.
  • The analysts mostly like its sleek unique look and improved user interface.
  • But will Priv be enough to pull BlackBerry out of its current rut?

It’s about two weeks since BlackBerry launched Priv, its first Android smartphone, and the reviews, mostly positive, have started pouring in. Joana Stern, Personal Technology Columnist at the Wall Street Journal had this to say about the BlackBerry Priv:

Maybe, just maybe, it isn’t too late for BlackBerry. As Samsung, LG and other Android titans focus on making phones ever-so-slightly thinner, faster and better at taking photos, the Priv’s slide-out physical keyboard, long battery life and focus on privacy—hence the dumb name—stand apart from those. It even challenges Apple’s ruling iPhone. A few performance issues aside, the Priv is the first BlackBerry in years that I have loved using—and that I can recommend."

Stern noted that typing via the Priv's keyboard is ~20% faster than typing on your typical iPhone. She also expressed enthusiasm about the phone’s 2K OLED display as well as its Android apps and sleeker user interface. Her only major gripe were the phone’s app functions which she says have remained "inexcusably slow."

Miss Stern, however, was not the only one waxing lyrical about BlackBerry’s latest smartphone. Engadget's Daniel Cooper has given Priv a 77/100 score, and labeled the phone the best-looking BlackBerry (NASDAQ:BBRY) ever with a much more elegant UI than your average Android phone. His major gripe is the physical keyboard which he deemed slightly lackluster. Copper also wondered whether there still remained a big enough market for QWERTY smartphones.

BlackBerry stock makes short-lived gains

BlackBerry stock made some pretty decent gains after the positive review following the launch, moving above $8/share for the first time since July. The enthusiasm, unfortunately did not last long and the stock later gave up its gains, and then some more, probably due to investors harboring mixed feelings about Priv. BlackBerry shares are now down 33.7% YTD.

It’s all good when BlackBerry makes a product that actually receives decent reviews, but let’s face it: it will take a lot more than just a pretty smartphone to take BlackBerry back to its glory days. The biggest problem that BlackBerry faces right now is that few customers are pitched about the reliability and productivity offered by BlackBerry smartphones. For Priv to really take off, BlackBerry will have to significantly boost its ad spend to paint Priv as a viable alternative to high-end Android smartphones as well as the highly popular iPhones. In the minds of many consumers, BlackBerry is an also-ran in the smartphone universe, and for $699, a late edition iPhone looks like a better bargain.

Labelling BlackBerry Priv as just another BlackBerry Hail Mary may, however, be misguided because it’s a genuine contender capable of squaring it out with the heavy hitters. But even though the general feeling out there is that BlackBerry has finally managed to come up with a smartphone that just might pique the interest of consumers enough to give it a chance to compete against better-established brands, it has come a bit too late. Throw in the hefty price tag and BlackBerry Priv might still prove to be a hard sell.

BlackBerry CEO John Chen had earlier set a goal to sell the company’s hardware division if it failed to turn a profit by 2016. Perhaps the best that Priv can hope for at this point is to stall the planned sale a little longer.

Software licensing offers the best hope for a BlackBerry comeback

BlackBerry has seen its hardware division literally disintegrate before its own eyes, from selling 50 million units in 2011 to just 7 million in 2014. Falling hardware sales have in turn caused BlackBerry’s revenue to nosedive from $20 billion in 2011 to just $4 billion in 2014. BlackBerry stock has followed suit losing 86% of its value over that time-frame.

BBRY stock chart

BlackBerry stock price chart by

Much of the burden of recovery currently rests on BlackBerry’s software division. After showing signs of promise for several quarters, BlackBerry software sales had begun to stagnate due to poor monetization of the QNX platform. BlackBerry’s QNX embedded software consists of an operating system and middleware that is used in automotive infotainment systems as well as in medical devices and industrial applications.

BlackBerry’s software division has, luckily, received a new lease on life from an unexpected source--software licensing. BlackBerry’s Software and Services revenue grew 19% Y/Y to $74 million during the last quarter due to a 33% increase in software licensing revenue.

BlackBerry is taking concerted efforts to monetize its vast patent portfolio consisting of 44,000 mobile technology patents. The company has struck cross-licensing deals with several companies including Cisco (NASDAQ:CSCO). Mr. Chen though has observed that BlackBerry’s patent monetization efforts might take time due to the risk of alienating its partners:

"If you go too far and become too aggressive, you become a [patent] troll ... If you want to go about monetizing your patents in a non-aggressive, legal way then it takes time, and in a turnaround time is one of the key commodities you don't have, so balancing those two is very difficult."

BlackBerry can either choose to sell or license its patents, most of which the company claims are relatively young and therefore highly valuable. With BlackBerry shares trading at a mere 1.1 x book value, BlackBerry remains grossly undervalued for a company with strong exposure to the software sector. But investors will likely not be willing to cut the company some slack until it can show sustainable gains in either its hardware or software division. But at this point, the software division offers better chances for a recovery than the hardware division, BlackBerry Priv notwithstanding.

Brian Wu Brian Wu   on Amigobulls :
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