Morgan Stanley: BlackBerry's FY16 Targets Are 'Unattainable'

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In a report published Friday, Morgan Stanley analyst James E Faucette maintained an Underweight rating on
BlackBerry Ltd
BBRY
, with a price target of $7. Analyst James E Faucette said that, according to industry contacts, Mobile Device Management (MDM) has already been deployed on more than 50 percent of eligible devices and penetration could be as much as 75 percent on a dollar basis. "Remaining greenfield opportunities look increasingly limited and the recent survey by the MS Software team could suggest the market for stand-alone mobile security platforms is more limited than many would suppose." In the report Morgan Stanley noted, "Our checks also indicate MDM licenses from all vendors are being offered to carriers at significant wholesale discounts (as low as $2-$5 per month per device) as telcos aggressively bundle enterprise service agreements." Faucette believes that BlackBerry's ARPU target of $9 per month appears "unrealistic with its current offerings," since the challenging pricing environment. Although there has been progress on developing the platform, checks suggest EZPass conversion was at around 25 percent. Moreover, the most recent CIO Survey indicated that BlackBerry continuing to lag behind its MDM peers in evaluation opportunities. This implies that there could be "a long road" to achieving about 8-10mm subscribers, which is required to meet the company's guidance of $500mm in annual software revenue by the end of FY16. Faucette added that, after a full quarter of the latest devices, respondents of the CIO Survey expect to purchase fewer BlackBerry devices.
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Posted In: Analyst ColorReiterationAnalyst RatingsMorgan Stanley
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