It’s Not All Bad for BlackBerry

Be aware of this stat before acting on BlackBerry.

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The Motley Fool

Don’t get me wrong, there’s a lot of ugly in today’s BlackBerry (TSX:BB,NASDAQ:BBRY) release and we’ll get into this in a subsequent post.  However, before you go flinging your BlackBerry shares off a cliff, there was at least one bright spot to consider that is unlikely to garner much attention.

In BlackBerry’s fiscal 1st quarter, the company’s cash position grew from $2.9 billion at the end of the last quarter to $3.1 billion.  That’s almost $6.00 per share.  In fact, according to Capital IQ, BlackBerry’s pile of cash has never been bigger.  This is not a typical characteristic of a company that is facing imminent death.

Contributing to the cash build was BlackBerry’s solid free cash generation in the quarter.  With operating cash flow of $630 million and capital expenditures of just $83 million, $547 million of free cash was produced.

And this was not an anomaly.  In last year’s first quarter $558 million of free cash was generated and in fiscal 2013, this metric totalled to almost $1.9 billion.  Again, such prodigious free cash flow is not an indication of a company for whom the bell tolls.

Given BlackBerry’s market cap is currently about $5.6 billion (and falling by the second), this ability to produce about $2 billion/year in free cash gives it a free cash yield of an almost unheard of 35%.

Foolish Takeaway

You’re going to read a lot of negatives about BlackBerry today, and tomorrow, and probably for some time.  But as long as the company keeps pumping out free cash, they’re going to be around – in one form or another.  The company may be wounded but at this stage, the wound is not yet life threatening.

Looking for a smoother ride to riches than BlackBerry shares offer?  Click here now to download our special FREE report “3 U.S. Stocks that Every Canadian Should Own”.  These 3 companies prove that investing doesn’t have to be the emotional roller coaster that BlackBerry makes it out to be.

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Fool contributor Iain Butler does not own any of the companies mentioned in this report.  The Motley Fool has no position in any stocks mentioned at this time.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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