Market Overview

Highlights From BlackBerry's Conference Call


Following BlackBerry's (NASDAQ: BBRY) third quarter 2014 earnings release on December 20, management hosted a conference call to update investors on its long term strategies and goals.

Partnership with Foxconn

BlackBerry announced that it will be working with Foxconn on new smartphone following a lengthy discussion for a partnership.

“While the partnership with Foxconn represents a new model for production of Blackberry devices, it also represents a significant change, an important change, in our model for managing working capital,” the company's CEO John Chen said. “Under this new partnershp, Foxconn will jointly develop and manufacture certain new Blackberry devices and manage the inventory associated with those products,” he added.

Foxconn will take over the hardware design of new devices while BlackBerry will continue to provide software technology. The two companies will collaborate jointly on distribution channels.

BlackBerry is set to release its first joint product in March or April, codenamed Jakarta.

“It's going to be very, very competitive, and we're starting with the Indonesian markets,” Chen explained. “We have another maybe six or seven different markets that we identified, that we would like to take these devices to,” he added.

BBM Messenger

The company announced that it has a total of 80 million users on the instant messaging platform following the release of an app for Android iOS devices. 60 percent of those active users are using it daily, which is higher than the 50 percent Chen believes is the daily usage rate for Instagram users.

Chen noted that fiscal 2015 will see the company investing and building out more features and channels which could provide “some reasonably good revenue in about FY16” from the messaging services.

Balance sheet

The company's balance sheet, according to management's statement, “remains very strong.” Cash increased in the quarter to $3.2 billion, up from $2.6 billion last quarter. This reflects the $1 billion convertible debenture that was completed in November. The company also received a “significant” tax refund in the quarter.

The road to profitability

Chen noted that the company has adopted a new vision which includes the Foxconn deal which helps the company reduce purchasing obligations and inventory clearing costs.

By the end of fiscal 2015 the company will become cash flow positive and profitable, according to Chen's remarks.

“And so you should be looking at it towards the end of fiscal year '15, sometime early in fiscal year '16 as our targeted date for that to become hopefully a positive number, but at least not a negative number,” said Chen.

Analyst reaction

Benzinga's Newsdesk reached out to several analysts for their insights.

One analyst highlighted the 35 percent short interest in shares of BlackBerry (and the sharp gains these traders have seen over the last few months) and suggested the Foxconn news shows -- if nothing else -- a pulse within BlackBerry managers.

The same analyst believes shorts may be viewing the Foxconn deal as an indication managers are attempting to make moves. He hinted at a relief rally Friday as the bad results are now out.

Most analysts pointed at a likely squeeze in the name on Friday leading to a more than 10 percent gain in share prices before noon.


Posted-In: Blackberry BlackBerry Foxconn BlackBerry Jakarta foxconn john chenEarnings News


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