BlackBerry share prices fell from $15 to just over $9 on the news of poor global sales in the last month. The company seems to be losing ground in core markets as rivals Google and Apple penetrate them. Stuart Jeffery of Nomura Equity Research stated that “half [BlackBerry’s] revenue in hardware is coming from places such as the Middle East and Africa. As Android penetrates those markets, we think the hardware business goes away for BlackBerry there.”
Heins had already announced a corporate restructure program that includes a cost optimization and resource efficiency program. It is expected that 10,000 jobs will be cut over the next year, predominantly in middle management. It has already increased its cash in the bank from $2 billion to $2.9 billion. The cash saved is expected to be reinvested in R&D and marketing. Crackberry.com argues that “the snazziest product in the world could fail with a counterproductive bureaucracy, or without any cash to market it.”
A lot of the cash saved will likely be reinvested in product development and marketing. Motley Fool argue that though Blackberry has had a bad patch, executives at the company seem optimistic for its future based on work-in-progress inventory figures: “Although BlackBerry shows inventory growth that outpaces revenue growth, the company may also display positive inventory divergence, suggesting that management sees increased demand on the horizon.”
Smartphone manufacturers are subject to fashions and fads. A popular company in one decade may be forgotten the next. Nokia Corporation (ADR) (NYSE:NOK) used to be extremely popular worldwide but didn’t stay ahead of the curve and, like BlackBerry, has had to slash prices on its latest flagship phon e to maintain sales. BGR.com assesses that “Lumia shipments currently total only about a quarter of Nokia Corporation (ADR) (NYSE:NOK)’s smartphone shipments three years ago.” BGR argues that the Nokia are farther ahead in their recovery curve than BlackBerry and the Lumia should ensure a quicker recovery than BlackBerry’s Z10 and Q10.
Different valuers put different valuations on BlackBerry. Nomura Equity Research feel that the price as stands of around $9.30 a share is good, advising a HOLD. Jefferies & Co put the valuation at $18 a share and advise a BUY. Such differentials in valuation show no firm general opinion on the future fortunes of BlackBerry.
Will BlackBerry return to the top of the smartphone table? With global sales of 2.7 million of its new flagship phones since launch and massive discounting ahead of the company’s coming products it may struggle against the lions at the table. Apple, for instance, has 400 million iOS phones currently working worldwide. BlackBerry may turn the corner if its restructure, new product development, and marketing strategy succeed. Success is by no means guaranteed.
The article Struggling BlackBerry Does…OK originally appeared on Fool.com.
Mandy Seay has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Mandy is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited
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