BlackBerry just can’t win

BlackBerry Earnings Q4

BlackBerry’s fourth-quarter earnings were better than expected, losing $0.08 per share, compared to the $0.67 loss most analysts were expecting. The company continues to make cost improvements as it tries to turn the company around, something Wall Street has asked for time and time again from the Waterloo, Ontario-based company. However, it’s not good enough, apparently.

Credit Suisse analyst Kulbinder Garcha downgraded shares of BlackBerry to underperform, following the results, noting that the continued weakness in cash burn and concerns about service revenues don’t exactly imply hope is around the corner. “While this is to be applauded we are concerned by the level of FCF burn and the ongoing pressure in services revenues and believe visibility on a turnaround is very low,” Garcha wrote in the note. “As such we downgrade to underperform and lower our price target to $6.”

BlackBerry burned through $800 million in free cash during the quarter, something Garcha and other Wall Street analysts believe will continue to happen over the near-term as it continues to transition the business. Garcha said he expects the company will have $620 million and $377 million in net cash by the end of fiscal 2015 and 2016, respectively, a far cry from the $2.7 billion in cash it ended fiscal 2014 with. However, that cash flow should be aided by real estate sales and income tax receivables, and the continued restructuring in the business.

For the fourth quarter, BlackBerry generated $976 million in revenue, a far cry from the $1.13 billion analysts were expecting. The revenue figure was down 18% sequentially, and 64% year over year.

With the company moving more towards services and messaging, with its BBM service, Garcha notes the visibility on how well these segments could perform is low, and may not be the bread and butter everyone wants them to be. “We see services revenue declining from $4.0bn in FY13 to $1.5bn in FY15. The challenge, we believe, is to grow MDM revenues in what is a crowded market and believe visibility on a revenue recovery remains low.”

Garcha isn’t the only analyst on Wall Street to take a shot at BlackBerry, with UBS analyst Amitabh Passi lowering his price target to $8 from $8.50, noting that much of the hope in the company is already baked into the stock price, and the remaining parts of the business are facing stiff competition.

“The enterprise mobile management (EMM) space remains very competitive; we question the value in BBM, BBRY’s mobile messaging platform; and QNX is too small to meaningfully affect financials today,” Passi wrote in the note. In the mean-time sub losses continue.” BlackBerry’s BBM service, which is now available on iOS, Android as well as BlackBerry’s operating system, ended the quarter with 115 million total users, and 85 million monthly active users (MAUs).

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