Raymond James Looks At BlackBerry As A Software Company, Likes What It Sees

A software-only model for BlackBerry Ltd BBRY seems positive, Raymond James’ Steven Li said in a report last month.

BlackBerry did not design this and it does not manufacture DTEK 50, which means there are is no liability or balance sheet risk for the company. While the hardware has nothing special, “all the BBRY differentiation/security is from the software,” Li mentioned.

Recurring revenues were 74 percent in Q1, and management is targeting 80 percent for F2017. Software guidance for F2017 is for 30 percent year-over-year growth, including inorganic stub M&A contribution. Li believes BlackBerry Software can grow organically at ~15 percent. He added that and EBITDA margin of 27 percent can be achieved in F2018, which can expand to 30 percent in F2019.

Related Link: BlackBerry To Partner With Indonesian PT BB Merah Putih; Will End Internal Hardware Development

Catalysts

The analyst highlighted catalysts to look out for:

• Radar: Differentiated asset tracking end-to-end solution leveraging a lot of BBRY heritage (security, battery efficiency, antenna performance, NOC). In customer trials (retailer, freight forwarders). Expecting to go GA end of August with potentially marquee customer announcements;
• Buying back the converts: In August 2004, the company had announced a buyback of up to $125 million of its debentures. These were issued in November 2013 with an interest rate of 6 percent per annum. “It’s clear to us BBRY plans to buy it all back and save $75mln/year in interest, boding well in terms of how strongly mgmt feels about the progress they are making and their balance sheet strength,” Li said.

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