The smartphone industry is quite unforgiving. Competition is so high that giant’s fall by the roadside without honour. For BlackBerry Ltd (NYSE:BB), now is the time to reinvent its business strategy and reclaim lost fame.
BlackBerry price performance
The last five months have been a period of mixed performance of the company’s share price. Interestingly, the tug of war between the bear s and the bulls seemed to find support at a little over $9.50.
Unfortunately, the price shattered the support and dipped to the current price of $ 8.41. Interestingly, this is the all-time low BlackBerry Ltd has gone since it began declining in 2011.
The 50-day moving average indicates that the stock price is unlikely to break the $9.40 ceiling. Furthermore, the 200-day moving average puts the ceiling at $10.62.
With the price resistance just close to the current stock price, it is evident that investors are unwilling to buy. Therefore, the supply glut of the company’s stock is putting a downward pressure on the price. As such, the price resistance of MA (50) shows signs of going further down.
Fiscal Year 2019 Second Quarter Results
If the recent earnings release is anything to go by, there is still trouble at Blackberry. Particularly, the company saw its year-over-year revenue fall by 12%. This upholds an annual trend that Blackberry is experiencing since early 2012.
Further, Q2 of fiscal year 2019 experienced diminished R&D spending. In particular, the company dedicated only $51 million unlike $60 million in the similar quarter last year.
In addition, Blackberry reported decreased GAAP revenues. In particular, the firm experienced GAAP revenues of $210 which is an 11.8% year-over-year decline.
On average, BlackBerry reports a decline of 26.2%. Interestingly, this does not bode well with investors since the industry is growing on average. The tech industry in general is booming with many stocks like Amazon scaling unimaginable heights this year.
Nonetheless, Blackberry looks like it might soon be a turnaround success story. John Chen, CEO of Blackberry believes investors are unfairly doubtful of the company.
During the release of the Q2 of fiscal year 2019 results, Chen said, “In the quarter, we exceeded our financial expectations driven by sequential growth in both our BlackBerry technology solutions and enterprise software and services businesses.”
As such, Blackberry is not the sick man investors want to believe it is. Interestingly, the recent strategic moves by Blackberry position it squarely for growth in the future quarters.
Particularly, the company acquired Cylance, a cybersecurity firm in a deal worth $1.4 billion. Cylance is a company in its best form currently with a revenue stream that is highly recurring. Further, the firm boasts of proprietary solutions that serve over 3,500 enterprise customers across industries.
With proper integration of Cylance into Blackberry’s operations, the company can expect increased growth. For instance, the company aims to leverage Cylance’s advanced AI and machine learning solutions in its Unified Endpoint Management. As a result, the acquisition will boost the company’s revenue while cutting down on R&D.
Blackberry is a difficult stock at the moment. There are challenges that are particular to the firm and others that are external. On its part, the firm is working tirelessly to transition from the loss making businesses like handsets segment.
Emphasis on the security systems, from which the firm is earning most revenue, will get the most out of the sector. Particularly, investors want to see the firm getting back onto a path of continuous growth in both revenues and profits.
Ultimately, the firm will have to control the high debts on its books.