- Blackberry stock continues to struggle in the market.
- The Blackberry Priv is designed to revive device sales.
- The fact that it has an odd design and a premium price could make it difficult to shift sales.
After showing relatively strong pre-orders and interest, BlackBerry (NASDAQ:BBRY) Priv could be the turning point for Blackberry stock. Interestingly, their phone division is small compared to its software and corporate division;however, it is a 'poster boy'. Therefore, a boost in smartphone sales affects the rest of the company. Moreover, there are strong indications of a second Android phone currently in development. This suggests that Blackberry is investing in its smartphones division.
Note: You might also be interested in 'Blackberry Priv: A Step In The Right Direction?'
To say that Blackberry has fallen from grace will be putting their current predicament very politely. Blackberry enjoyed strong growth between 2003 and 2007 due to being viewed as the company that would bring the world into the age of internet connected mobiles. However, due to a mixture of stubbornness, lack of foresight, and a reluctance to listen to the demands of customers, they have taken a battering in recent years. In order to revive sales, they have released the Blackberry Priv; a smartphone which leaves a lot of Blackberry’s design language behind and runs Android.
To put Blackberry’s fall in perspective, in June of 2008, they were trading at a price of $143.94; fast forward to now and they stand at $7.82. A significant drop below their current price would be disastrous because it could cause a lot of investors to hit the panic button, if they haven't done so already.
Blackberry Priv: Mispriced Once Again?
Blackberry hopes that the Blackberry Priv is the saviour that will draw attention back to the company and allow them to gain traction. The problem is that the Blackberry Priv is about 5 years too late and priced to compete with the iPhone 6s. This is a huge problem. Blackberry has to undercut both the latest Samsung and Apple devices in order to sell well. Interestingly, they made this same mistake with the Blackberry passport. And I challenge you to find someone who owns one of those.
Quite frankly, the influential millennials don’t find Blackberry devices desirable. Looking at the Blackberry Priv, it seems as if Blackberry’s management team made a phone for themselves with the hope that consumers might like it too. It boggles the mind how they can’t see something fairly simple: In order to move a device in large quantities, it has to be appealing to the mass market, and rightly priced.
It is worth noting that Blackberry’s strength lies in its patents and other holdings. However, it is hoped that their devices have a ‘waterfall’ effect of encouraging users to try out their other services and devices. Moreover, by selling a lot of devices, they can increase their presence and sell high value services to the corporate community. Therefore, one could say that a lot hinges on the Priv doing well.
In order to emphasize just how hard Blackberry has fallen; at one point they had 20% of smartphone market share. Fast forward to the present day, and they control just 0.3%. In fact Samsung’s Tizen controls more of the global smartphone market share.
Blackberry Financials Tell A Sorry Tale
From a financial perspective, Blackberry is firing blanks on most fronts. Notably, net operating cash flow has decreased by 4.34%, and Blackberry is currently underperforming the S&P 500. However, every cloud tends to have a silver lining. Blackberry has a gross profit margin which stands at a healthy 60.29%; however their net profit margin is a hair above 10%. Thankfully, with a close look at efficiency practices, the net profit margin can increase significantly.
In conclusion, Blackberry needs to be a lot more strategic about the way they price their devices, and how they manage their public perception. To be completely frank, the future isn’t looking bright for Blackberry stock. And for some holders of their stock, that can be a rock-hard-pill to swallow.