BlackBerry’s recent filing was so scary that Bernstein downgraded the stock 72 hours after upgrading it

BlackBerry Regulatory Filing Analysis

Bernstein Research analyst Pierre Ferregu is known for his dramatic whiplashes — he was strongly optimistic about Nokia during its big dive and then turned deeply pessimistic. This week, Ferregu had a three-day mood swing that was surprising even for him: He upgraded BlackBerry shares on Monday and downgraded the stock just two days later on Wednesday.

It’s a pretty good example of how desperately difficult things are for sell-side equity research analysts in the handset space these days. Motorola is gone, Nokia is gone and many view Samsung as not investable, so brokerages should somehow be able to sway clients to switch their BlackBerry and Apple positions around to create trading commissions. This is insanely hazardous, of course, and just a day after Bernstein had upgraded BlackBerry, the company issued a regulatory filing with gruesome details.

The company essentially admitted it is having trouble estimating the size of its handset inventory, presumably because the demand is declining so rapidly the number is a moving target. BlackBerry 10 devices made up less than 29% of the total volume of BlackBerry devices sold to end customers during the August quarter, a number that is shockingly low even after all we’ve learned about the company’s struggles.

BlackBerry also seemed to make an overt reference to new erosion in Africa and Middle East by noting that “the intense competition impacting the company’s financial and operational results that previously affected demand in the United States market is now being experienced globally, including in international markets where the company has historically experienced rapid growth.”

All in all, the drama around BlackBerry is unlikely to die down in the coming months. The actual business may be in dramatic decline, but there is a chance that the patent portfolio could be valued much higher than investors now estimate. BlackBerry hasn’t really specialized in litigation, but it might be able to start going aggressively after Asian smartphone vendors who have not licensed its email or messaging patents.

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