"1M, which we expected after the poor May Q sell-through. An H2 enterprise BB10 refresh should help. We expect BBRY’s MDM solution to gain traction throughout this year but that proof points may be limited until the end of the year as enterprises trial the solution. We reiterate our Buy as we consider the salvage value and potential opportunities in software/services.
Risk/reward is to the upside:
stock approaches distressed salvage value. BBRY has ~$6/share in cash and we estimate its patents to be $2-$3/share. Assuming continued cash burn, we believe the distressed salvage value is $6. We believe the undistressed salvage value is $9-$10 assuming no value in hardware and $3-$4/share for services. We believe MDM could provide $8 of value. We expect the broader MDM roll-out to occur in FY15 and think quantitative proof points of the MDM ramp may be hard to come by this year.
BB10 build cuts:
As expected, BBRY cut its BB10 build plans after the poor sell-through in the May Q. We are still surprised that BBRY raised build plans at the end of May despite the worsening sell-through in the back of the month. The cut from 2M+/month to 1M/month
aligns with our 2.5M and 3.0M BB10 estimates for FQ2 (Aug) and FQ3 (Nov).
H2 enterprise refresh:
Despite share loss and BYOD, we think there is pent up enterprise demand for the BB10 handsets with the improved web browsing experience as the main
attraction. With the launch of the simplified BES10.1, the BYOD MDM solution, and the Q10/ Q5 we think enterprises will shift from trials to broader roll-outs in H2. The swing factor is that BBRY's initial poor showing with BB10 could cause some enterprise customers to fear
for the longevity of the BBRY platform and delay or skip refreshing their BBRY handsets.
Cash bleed less of an issue than feared:
We believe that tax rebates combined with solid DSO/DPO management should enable BBRY to mitigate cash concerns. Specifically he DPO increase in FQ4 (May) increased primarily due to higher marketing and advertising expenditures related to the BB10 launch. Marketing and advertising payment terms are typically much longer than BBRY’s standard supplier payment terms, and we believe this was a major driver rather than BBRY elongating its payment terms to its hardware suppliers.
Valuation/Risks:
Based on our FY14 estimates, our price target is 0.6x EV/revs inline with peers' CY14 mean of 0.6x. Risks: 1) BB10 fails; 2) current subscriber base declines more quickly than expected; 3) lack of interest in OS licensing by other handset OEMs.
DSO and DPO:
DSO rose from 76 days in FQ3 to 92 in FQ4 to 95 in FQ1 vs. a historical range of 60 to
127. Offsetting the DSO increase, DPO rose from 114 in FQ3 to 150 in FQ4 to 163 in FQ1.
DPO increased primarily due to higher marketing and advertising expenditures related to
the BB10 launch. Marketing and advertising payment terms are typically much longer
than BBRY’s standard supplier payment terms, and we believe this was a major driver
rather than BBRY elongating its payment terms to its hardware suppliers.
Inventory Level:
DOI rose from 28 days in FQ3 to 29 days in FQ4 to 41 days in FQ1 (historical range of 19
to 51). On an absolute basis inventories rose $284M to $887M Assuming that most of the inventory is BB10 and that the BB10 ASP is $525 implies BBRY has 1.7M units on its books.
Purchase Commitments:
BBRY has $5.2B in purchase commitments vs. $6.0B last quarter. Of the $5.2B, $5.0B is for within a year, which compares to our NTM COGS estimate of ~$6.4B. Heading into
BBRY’s FY12, the company had one-year purchase commitments of $4.9B vs. an eventual
reported COGS of $7.6B (65%) vs. ~78% for NTM. This implies that BBRY may have too
many Q10 and Z10 components, especially if they are not fungible with Q5 and A10
components, leading to BBRY being forced to build more Q10s and Z10s that it wants
and then selling them at a discount.
Server Deployment No Longer Shared but BES 10 Opportunity Likely High:
In the FY2012 40-F, the company highlighted a key competitive advantage as being “the
deployment of over 250,000 BlackBerry Enterprise Servers around the world makes it
more difficult for a new solution to gain a market foothold.” In the recent FY2013 40-F,
the company no longer highlights this as a competitive advantage and does not provide
the number of BlackBerry Enterprise Servers deployed. While we believe it is negative that the company is no longer sharing the total server deployments, given that BES 10
penetration is currently ~18,000, we believe it leaves substantial opportunity for the
company.
Fortune 500 Deployment:
BlackBerry currently has over 90% BES deployment at Fortune 500 companies. During the FQ1 earnings call the company highlighted that 60% of Fortune 500 companies are
testing BES 10. This leaves 30% of Fortune 500 companies that were previously BES users not even trialing the new software. If we give BlackBerry the benefit of the doubt, this is
likely due to slow adoption of new technology and software by customers in certain
verticals; however, it could also be greater migration toward competing BYOD platforms.
Acquisition of Intangible Assets Run Rate:
BlackBerry’s acquisition of intangible assets primarily relates to licensing agreement
renewals with third parties for the use of Intellectual Property. The company also acquires businesses to gain access to technologies used in its products. FY2012 saw elevated levels of acquired intangible assets due to BlackBerry’s involvement in the Nortel patent acquisition with the consortium ($775M contribution; consortium total was $4.5B). In FY13, quarterly cash outflows for acquired intangible assets were $284M, $253M,$233M, and $235M for FQ1, FQ2, FQ3, and FQ4, respectively. FQ1 FY2014 saw an
outflow of $335M; however, this was due to certain prepayments for licenses related to
building the new products inventory. We believe the company’s guidance of $240M
quarterly run rate is realistic.
Deferred Revenues:
Deferred revenues fell from $542M to $346M (-$196M Q/Q). While the filings do not
indicate the precise reason, we postulate that the decline was due to the launch of BES
10.1 as deferred revenues had been at a much higher level than normal for the past
several quarters.
Subscribers:
Overall subscribers were -8% Y/Y with EMEA -10%, Latam +5%, Asia Pacific +29%, and N. America not disclosed.
Customers:
Two customers combined to be 23% of revenues in the quarter."
Das sind die wichtigesten Daten des Q1 2014 und seine Erwartungen. Link gibt es nicht, da es eine PDF-Datei ist, die ich hier leider nicht einstellen kann...
Trotz vereinzelt guter Nachrichten, ist es schwer bei Blackberry positiv gestimmt zu bleiben. Noch ist nichts entschieden und Blackberry hat noch Möglichkeiten das Ruder herumzureißen, allerdings sollte das bald geschehen... :-(
Gruß |
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