There’s no doubt that BlackBerry Ltd. (TSX: BB)(NASDAQ: BBRY) has had a tough run. The shares are down 86% in the past five years and the company nearly found itself in penny-stock territory late last year.
Today, value investors are deciding whether or not BlackBerry is still teetering on the edge or has stabilized and is ready to reward shareholders significantly over the next several years.
Here are five reasons I think value investors should consider adding a small BlackBerry position to their portfolios.
1. John Chen
BlackBerry’s new CEO, John Chen, is one reason investors are feeling better about the company’s prospects. Since Chen took over, the company has shifted away from trying to be all things mobile to all people, and is focused on leveraging its core strength — secure and reliable communication solutions for business people.
Chen himself gave the company a 50-50 chance of survival shortly after he first took the helm late last year. Today, he is much more confident about BlackBerry’s prospects.
As a well-regarded tech turnaround expert, Chen has begun to convince the market that he will succeed. More importantly, he has instilled a renewed sense of confidence in his employees, and that carries incredible value going forward.
The recent acquisition of Movirtu is a great example of BlackBerry’s renewed focus on the business customer. Movirtu is a SIM developer and has created a product that allows a single BlackBerry device to have multiple active accounts, allowing employees to keep personal use and business use separate.
Small businesses can’t afford to cover personal-use data, voice, and messaging charges for their employees, but they also don’t want to require their employees to use their personal devices for work.
The new technology will allow BlackBerry’s enterprise customers to create two profiles on the same phone. The employee can then easily toggle between the two and the company can control what services are available on the company-side of the account.
The Movirtu deal is a good example of why the market is starting to feel better about BlackBerry’s prospects.
3. New Passport
Keeping with its focus on making life easier and secure for business people, the new Passport device should resonate well with niche markets in the enterprise community. The large 4.5-inch square screen and three-row keyboard coupled with BlackBerry’s security features should be popular with a wide variety of corporate and small-business users and help BlackBerry differentiate itself from heavy competition in the smartphone market.
4. Lean corporate structure
BlackBerry cut 60% of its employees and shifted manufacturing of its smart phones to Foxconn. The scaled-down size means the company only has to sell about 10 million devices annually to be profitable. With the launch of the much-anticipated Passport and the success of the new Z3, BlackBerry is on the right track.
5. The Internet of Things (IoT)
The idea that everyday devices can constantly send and receive data over the Internet, non-stop, 24/7 is exciting and very scary from a security point of view. This is why BlackBerry’s security expertise could give it a huge advantage if IoT actually takes off.
The bottom line
Competitive threats still loom large for BlackBerry but the company appears to be on the right path. It probably won’t reach the stratospheric valuations it once enjoyed, but for new investors, it just has to grow at a reasonable rate.
BlackBerry’s latest earnings come out in the next few days. An earnings beat or revision upward of guidance could send the shares a lot higher.