BlackBerry (BB.TO)

(Market Call Minute.) In transition from the phone business to the software business. Haven’t got their software business growing, and still have to get turned around. The hope is Ottawa.

Paid $10.46 a few years ago when he thought it was going to be taken over. John Chen basically says "These are my goals." and has been hitting them. When management does that, it gives him more confidence. They’ve had to completely turn around this huge, huge boat, which takes time. Revenues are way down from where they where before, but seem to be stabilizing to some degree and thinks they are going to go up, and there is going to be a positive bottom line. Can see this going well over $20.

Has a lid somewhere around $15, and has hit it over and over and over again. The company is focusing away from handheld devices, and moving into areas where they can prosper. Nevertheless, you need a break out. You need it to stop going sideways. The only way to trade this is to buy it somewhere around $8-$9. He wouldn't touch this at this point, because it is getting too close to the top of its range.

John Chen has done a great job of keeping the company alive. They’ve totally shifted away from mobile phones and into software. It is still one of the most secure phones you can use. Thinks they will survive, but whether they will prosper or not is another question. Needs another couple of good quarters, where the revenue from the software side really starts to show.

This has gone from technology to more of a software company. In Canada, in technology in there aren’t too many options. He’s unsure how they will continue to make profits. They’re in a very competitive industry. Would prefer a major US tech player. If you own and have made some profit, he would suggest you rebalance out of that.

Sell or Hold? They’ve changed from hardware to software. The asset values he sees from the street are $16-$17, and the consensus might be $15, so you are getting pretty close. If he owned it with $10 costs, he would be tempted to take half off the table. It is getting close to full value. John Chen does a good job.

Has a model price of $4.55, a 68% downside. Earnings are coming back slowly. Believes there was another key executive that left. There is no fundamental reason to buy this. Prefers others.

Has a couple of interesting deals that it has arranged. It is now out of the woods and is a different company. It will get royalties from selling Blackberries, which seem to have some strength in places like Indonesia or Philippines, with governments who want total security, or close to it. John Chen has done a good job.

It looks like they are coming out the other side, particularly with the software side of their business. Has a market cap of $7.4 billion, so a very large company in Canada as well as globally. Have produced some significant free cash flow and is now free cash flow positive. This has a price/cash flow that is pretty attractive, at roughly around 7X or 8X.

He likes what the CEO, John Chen, is doing. They just signed new deals this month with some major players, Delphi and Timex. They are moving in the right direction. Have a tremendous amount of analysts’ coverage, and it is still in the news. When a company like this gains its legs, it can move up very quickly, and he can see how it could double. (Analysts’ price target is $10.50.)

Management has moved away from the phone business, and has been moving into the software side. A really good job has been done on restructuring. Now they have to see more growth coming from that business. You’ll have to look for them to make some acquisitions and push their software business to a new level. Business is going to be lumpier than people think. It is not going to be a smooth transition, and you will have to expect some volatility. This is one he would look to buy on dips.

(Market Call Minute) So last century. They are trying to find something to do now that they are out of the mobile handset business. They are just another software supplier and he can’t imagine why you would want to buy it.

He still likes it. GS-N just put it down to a sell. Chen seems to be hitting his targets for the most part. He bought it assuming it would be taken over, but that did not happen. He kept it because Chen had his previous company taken over. It is so big and has such a huge following that when it does well it can really shoot up.

If you own this, the most valuable parts are probably in the patent portfolio they accumulated that were necessary to make a mobile device. There may be somebody interested in these patents, but the problem is, it includes everything that goes with it such as leases on properties, potential severance, etc.

He doesn’t know the seasonality, but technicals show it has had a fantastic move this year, but is now going down. It has some strong support at around $11. The technology sector has a tendency to peak at around the middle of July, and then tends to weaken through to about the middle of October.