Investors finally gave up on the speculatively bullish bet it made in shares of BlackBerry (NASDAQ: BBRY) between May and June this year. CEO John Chen touted the secure software maker’s growth potential in ADAS (autonomous driving). Markets are both fickle and impatient: they want to see revenue growth today.
Mismanaged Devices Unit
Revenue from BlackBerry’s devices unit is a footnote on the balance sheet. The profitability potential is immense but partner TCL and other Asian companies paying royalty and licensing for BlackBerry Androids are treating the decently designed device with secondary importance.
This is a shame: BlackBerry and its partners could have ramped up sales to compete in the crowded Android smartphone market. This would have brought in the cash flow BlackBerry needs to fund its MDM (mobile device management) and ADAS market.
MDM Competition
Microsoft (NASDAQ: MSFT), IBM, Apple, and VMWare (NYSE: VMW) are all significant threats to BlackBerry in the MDM market. As VMWare bundles its solution, BlackBerry’s BES UEM software is a less compelling installation. BBRY stock is not cheap: it trades at a 40x P/E and a 120x forward P/E. A deceleration in MDM revenue will make the stock more expensive still.
BBRY stock will find support, eventually, but markets are losing patience.
