Many Questions Remain At BlackBerry, Morgan Stanley Says; Remains Bearish

In a report published Thursday, Morgan Stanley analyst James E Faucette maintained an Underweight rating and price target of $7 on

. The lackluster new device sales possibly indicate slow traction in software. "We continue to believe management will have to revise down FY16 revenue guidance if BBRY does not acquire significant revenue. Software ramp towards guidance remains in question," Faucette said, while adding that although the company was expected to meet the FQ1 software revenue estimate, there were doubts about the management's software and messaging revenue target for FY16, "which likely requires broadly upselling its BES12 subscribers and expanding significantly beyond its EZ Pass base." The analyst also believes that there continues to be little or slow growth in the TAM for mobile enterprise subscriptions, as CIOs are unwilling to spend extra on a specific device management vendor. On the other hand, opportunities to upsell in the application and content management market appear price sensitive and tend to involve several other vendors, based on the use case. According to the Morgan Stanley report, "For BlackBerry to surmount these challenges while channel relationships and direct sales efforts are not fully in place seems unlikely given our previous checks implied that most lucrative accounts are already spoken for. Device estimates could be a reach and could signal additional challenges to software ramp." Apart from competitive challenges being faced by BlackBerry, the longer enterprise sales cycles suggest that the ramp in software sales for the rest of 2015 is likely to come in below guidance.