PRIV IS BBs Hardware Saviour!

PRIV pic

BB’s new phone: PRIV – has arrived! As competitors focus on making phones thinner, faster and better photos specifications; PRIVs slide-out physical keyboard, long battery life and focus on privacy stand apart from the rest. PRIV  aims to recapture many of its former BB users back who still want a hard keyboard. Apple is the only company BB will find a challenge to compete with (Johnsa, E., 2015)

PRIV is selling conservatively, but well. PRIV will be an important catalyst for BB. The number of phones sold on a quarterly basis has steadily declined. Many Wall Street analysts (and I) are focused mainly on the company’s software growth. From a valuation standpoint, the hardware segment gets very little attention and isn’t seen as any type of potential growth driver for the company (Orange Peel Investments, 2015).

BB used to have a defensible niche among bankers, lawyers and similar professions. It lost this due to the lack of apps. PRIV has advantages over other phones due to the expandable SD card slot. PRIV is garnering solid reviews. The device is impressive with benchmark scores comparable to competing flagships (Blair, M., 2015).

BB is emphasizing privacy– hence the name of this model. The recent news of security breaches that have plagued the iPhone should demonstrate to most users the value of security (Orange Peel Investments, 2015). PRIV runs on Android which has over one billion users. BB only needs a fraction of a percent of this pool to see what would be large-scale success for this phone (Wahlman, A., 2015)

BB acquired Good Technology this month. This will be accretive to BBs earnings and cash flow. BB is looking like it is steadily cash flow positive. The addition of another segment could increase the stock price, which currently trades at a very small multiple to the company’s cash (Wahlman, A., 2015).

The valuation for BB at present is a conservative one. If BB continues to show progress with licensing its patents, software as a service, and PRI, all while potentially acquiring other businesses and maintaining a $2.5 billion cash balance, the market will value BB over £15 at some point again (Orange Peel Investments, 2015).

BB targets five million units to have a profitable smartphone business. At $600 a unit and a 30% margin, sales of three million units would add $1.8 billion to BB revenues and over $500 million to operating income. Those figures are significant for BB.While PRIV is a premium priced smartphone, it is arguably every bit as good as an iPhone or S6 (Johnsa, E., 2015). PRIV shows its colours on benchmark performance tests where it compares quite well with other Android flagships (Blair, M., 2015).

BBs patent portfolio has been valued over $1 billion. BBM is worth approximately $1 billion.  The value of the company’s net cash position (near $1.5 billion)In terms of valuation, BB is not even close to a sum of the parts; that is without BBs hardware segment producing. If BB can revive this segment again, shareholders should see shares move well past £15 again. £20 would be a fair value for BB stocks (Orange Peel Investments, 2015).

References

Blair, M., 2015. BB closes up 5.5% after PRIV gets decent reviews. [online]. Available at: http://seekingalpha.com/news/2909306-blackberry-closes-up-5_5-percent-after-priv-gets-decent-reviews

Johnsa, E., 2015. BB Closes $425m Good Technology acquisition. [online]. Available at: http://seekingalpha.com/news/2882186-blackberry-closes-425m-good-technology-acquisition

Orange Peel Investments, 2015. Initial Sales Indications For BBs PRIV Look Good. [online]. Available at: http://seekingalpha.com/article/3680086-initial-sales-indications-for-blackberrys-priv-look-good

Wahlman, A., 2015. Is BBs PRIV Similar To Apple’s 1997-2007 Comeback. [online]. Available at: http://seekingalpha.com/article/3676076-is-blackberrys-priv-similar-to-apples-1997minus-2007-comeback

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