Don't Get Too Excited About This BlackBerry Upgrade


Shares of smartphone-maker BlackBerry rose 6.3% Thursday after Societe Generale analyst Andy Perkins raised the firm's rating on the stock from sell, all the way up to buy. At the same time, Perkins set a $17 price target on shares of Blackberry, up from his previous target of $13, and representing a nearly 18% potential gain from Thursday's closing price at $14.42 per share.

So what made made him change his mind?

In short, Perkins writes, their "channel checks have come up with some surprisingly strong numbers for RIM's unit sales for" the current fiscal quarter. More specifically, he thinks BlackBerry might be able to sell more than four million of their new Z10 smartphones during this quarter alone.

At the same time, Perkins also stated they would be "surprised" if the QWERTY keyboard-sporting Q10 smartphone sold more than one million units -- but that's understandable given the fact the Q10 has only been available for just over a month in a few countries, and was only released in the massive United States market last week.

In total, Societe Generale now believes BlackBerry could sell more than five million Blackberry 10 handsets for the quarter, which is above consensus estimates calling for sales of between 3 million and 4 million BB10-enabled units.

The catch?
Curiously enough, Perkins also noted that sell side analyst guestimates are unsurprisingly all over the map given the difficulty in nailing down exact unit sales numbers, with revenue "estimates published over the last month ranging from $3.1 billion to $4.1 billion, and operating results from a loss of $100 million to a profit of $344 million." Remember, BlackBerry management told investors during its latest quarterly earnings report in March to expect the company to "approach breakeven financial results" for the current quarter.

What's more, while he admitted they can't find any "direct support of [their] forecast of a large rise in sales of new portfolio products," they were optimistic. BlackBerry's previous painful losses in the mobile Internet market seem to have "stabilized and even risen slightly" in the United Kingdom -- that is, at least, according to recent data from Global Stats' StatCounter webpage.

And remember, the United Kingdom is an important market for BlackBerry, especially considering it was the first market to receive both the Z10 and the Q10 smartphones in late January and April, respectively.

When we zoom out a bit from a laser focus on the UK, however, Perkins' also reminded us of the same data that fellow Fool Evan Niu recently referenced from Kantar Worldwide, which indicated last week that BlackBerry's most formidable competitors are only extending their lead in the massive United States market.

Specifically, while Google's Android browser still holds a commanding lead, with 51.7% of the domestic market, Apple's iOS managed to gain 2.3% share in the United States to secure 41.4%, while Microsoft's mobile OS also gained an impressive 1.8% over the past year, and now holds a 5.6% share.

Meanwhile, as Evan pointed out last week, those gains by Apple and Microsoft came largely at the expense of -- you guessed it -- BlackBerry, whose share of the U.S. smartphone market has fallen from 5.3%, to a dismal 0.7% over the last year.

A sliver of hope
This, of course, doesn't necessarily rule out the possibility that BlackBerry might be able to pick up the slack in other markets, especially considering the company last month unveiled a lower-cost BB10-enabled smartphone, dubbed the "Q5," aimed at developing markets like India and China.

Remember, however, as I wrote in February, those territories already come with built-in competitors in the in the form of lower-cost Chinese phone makers like Huawei and ZTE, both of which rocketed last year past the likes of HTC, Nokia, and Blackberry to secure the third and fifth spots, respectively, in the top five global vendors in terms of fourth-quarter smartphone unit shipments.

Unsurprisingly, IDC data from last quarter showed BlackBerry fared no better, as Samsung and Apple remained firmly on top by shipping 32.7%, and 17.3%, of all smartphone units, while LG, Huawei, and ZTE took the third, fourth, and fifth positions in the list by shipping 10.3 million, 9.9 million, and 9.1 million smartphones, respectively.

What's more, recent rumors also suggest Apple could be planning a more affordable iPhone of its own going forward, which could itself easily turn the world of smartphones on its head by capturing the very developing markets that Blackberry needs in order to succeed.

Grasping at straws
As for now, BlackBerry has remained cash-flow positive, and does have some time to right its ship, thanks largely to its impressive absence of debt, and $2.9 billion in cash and investments at the end of last quarter. This is good for 39% of BlackBerry's current total market capitalization.

But, while this particular upgrade may hold an element of truth over the short term with regard to BlackBerry's stabilizing U.K. market share, I think it's a stretch to say that it's enough for the company to successfully maintain a steadily profitable business over the long haul.

As a result, I'm afraid that the risk of BlackBerry continuing to get squeezed out of the mix in today's increasingly crowded global market simply makes this a bet I'm not yet willing to take.

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