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Goldman Sachs Maintains Neutral Rating For BlackBerry

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Even after talking to John Chen, Goldman Sachs has maintained its neutral rating for BlackBerry. Whether or not this is called for, I am no anal-yst nor finance guru, so I shall leave it to you to decide. But, take a look at what they said.

According to analyst Simona Jankowski:

There were several incremental takeaways from our meeting. (1) Mr. Chen reaffirmed that the company can achieve its target of cash flow breakeven exiting FY15 (Y/E Feb). To reach positive operating cashflow in FY16 (Feb), Mr. Chen believes the company would need to have about $500mn in quarterly opex, at least 40% gross margins and about 10mn annual smartphone units. (2) As a top priority, BlackBerry seeks to re-establish profitability in its hardware (smartphone) segment, using a multi-pronged approach involving bill-of-materials reductions, inventory management, and focus on warranty, channel fees, distribution costs, logistics, repairs and IP costs

BlackBerry plans to migrate a majority of its volumes to Foxconn, including the Classic, which is a variable cost model that should result in positive gross margins. Longer term, BlackBerry may also use its patent portfolio to generate cash and offset some of its outbound licensing fees. (3) Regarding Services, Mr. Chen noted that it has already seen some competitive customer MDM displacements due to EZ Pass and the upcoming BES 12 platform. Mr. Chen clarified that enterprise customers represent 60-70% of the company’s subscriber base once BIS customers are included, above the 20% estimate provided on its latest earnings call based on BES customers alone. (4) Both QNX and BBM provide long-term upside optionality for the company

Via Streetinsider

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