Recently, it was announced that, effective from January 30, 2013, the company would operate around the world under the iconic name BlackBerry. The legal name of the company has not changed, but the company will do business as BlackBerry. However, the approval of the official change by shareholders still hangs in the balance, and will be discussed at the company’s Annual General Meeting later in 2013.
Research In Motion Ltd (NASDAQ:BBRY) recently, reported the results of Q4 fiscal 2013. The results came as a surprise to the market, as the company outdid several expectations. The robust performance exhibited by Research In Motioncan be attributed to several factors such as; the launch of the new BB10 OS- based smart phone, a strong and dedicated BlackBerry subscriber base of approximately 76 million, a strong investments balance of $2.9 billion and zero debt on its balance sheet.
During the past one year, the company’s stock price has appreciated by nearly 139%, and though the sudden burst in its price is not entirely based on fundamental reasons, it includes rumors of a takeover by the Chinese Electronic giant, Lenovo.
It must be noted, emerging markets in particular are witnessing a surge in the demand for smart phones, which presents a huge growth opportunity in the international markets. After assessing the results from Q4 fiscal 2013, it can be concluded that Research In Motion Ltd (NASDAQ:BBRY) isn’t a U.S. story anymore instead the company has transcended into becoming an international phenomenon. During Q4 fiscal 2013, United States constituted less than 26% of Blackberry’s revenues, and just 11% of overall shipments
Q4 Fiscal 2013 Highlights
By the end of Q4 fiscal 2013, Research In Motion Ltd (NASDAQ:BBRY) reported a net profit of $114 million or $0.22 per share. It operated on a gross margin of 40.1%, this compared with 33.5% reported during the Q4 fiscal 2012, is an extremely positive sign for the struggling company.
Furthermore, the company registered shipments of 6 million smart phones, which includes an order of one million BlackBerry Z10 units. The company also managed to sell 370,000 BlackBerry Playbook tablets, up 45% sequentially, however, it is noteworthy that the tablets were sold on discounted prices.
Research In Motion Ltd (NASDAQ:BBRY), primarily focused on controlling its operating cost, as it reduced the headcount by approximately 5,000 (about 30% of its present workforce), this was coupled with a huge reduction on the R&D expense. I expect such initiatives to improve the company’s bottom line going forward.
Earlier this year, Research In Motion launched the much-awaited Z10 smart phone. The phone can be labelled as an instant success, since; it has already generated a staggering 1 million order from one of BlackBerry’s well established long time carrier. In addition, the all new BB10 OS-based Q10 smart phone (including both touch and physical keyboard options) is already in the pipeline.
As more and more large corporate firms lean towards BYOD (bring your own device), presenting an interesting opportunity for BlackBerry to reclaim some of its lost market share and ascendancy in the smart phone space.
I believe, Research In Motion Ltd (NASDAQ:BBRY) always had a compelling enterprise story to tell with its BES 10 support and BlackBerry Balance; if it can once again interest government agencies and large corporations into using BlackBerry while bringing in new customers, it may well rise from the ashes again.
Competitive Landscape
Relative to Research In Motion Ltd (NASDAQ:BBRY), Microsoft Corporation (NASDAQ:MSFT) got a head start in comparison; nevertheless, Windows Phone presently only claims a market share of 3%. It recently launched its most hyped and latest operating system Windows Phone 8; nonetheless, it is not a radical development and the physical appearance of the device looks nearly the same as Windows Phone 7.
Microsoft Corporation (NASDAQ:MSFT) has been selling Windows Phone 7 devices for over two years now, yet the company is still struggling to maintain its market share in the smart phone space.
Similarly, Research In Motion Ltd (NASDAQ:BBRY) also competes with Apple Inc. (NASDAQ:AAPL). Apples’s iOS is the pinnacle of innovation, as it revolutionized the entire mobile computing industry. However, new entrants in the high end smart phone space could lead consumers into drifting towards more radically innovative and disruptive products such as Galaxy S4.
Apple Inc. (NASDAQ:AAPL)’s iPhone 5 is the “fifth generation marvel”, which enables it to command its prices, as it offers ground breaking technology. Nevertheless, going forward hierarchy in the smart phone market could drastically change.
Future outlook and Recommendation
A big concern for Research In Motion going forward, is perhaps, the management’s decision to change the revenue model. The new model may reduce the operating margins considerably, as only subscribers that choose advanced services, including greater security will pay the service fees. This might dent the company’s overall revenue from its services. However, the management believes, this initiative will enable it to retain the current subscriber base and add new ones in the future.
Moving ahead, the company plans to invest aggressively in marketing and estimates an increase of 50% sequentially, in order to promote the all new BB10 series. This may curtail the margins in the near term.
Another area for concern is heavy reduction in the R&D spending. In today’s competitive smart phone space coming up with radically innovative products can enable Research In Motion Ltd (NASDAQ:BBRY) to compete with Apple Inc. (NASDAQ:AAPL); however, spending cuts on R&D may hurt BlackBerry in the longer run.
Although, Research In Motion has taken huge hit on its dwindling hand held devices during the past few years, nonetheless, with the new line up for BB10 on the horizon coupled with zero leverage and restructuring of cash equivalents ($2.9 billion), should enable the company to survive in this lean period of transition.
I firmly believe, in the ever changing, and rather fickle, mobile computing industry, Research In Motion Ltd (NASDAQ:BBRY) is certainly a hold, at least for now.
The article Is BlackBerry a Long-Term Investment? originally appeared on Fool.com.
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