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Analysts say BlackBerry Ltd (BBRY) Hardware Reaching ‘Critical Juncture’ This Year

Blackberry ltd NASDAQ:BBRY

BlackBerry Ltd is seeing a tough time turning around its handsets business that is continuously losing subscribers and money. On whether or not the firm will take final decision on the division, Scotia Capital analysts say the hardware division will reach a ‘critical juncture’ sometime this year.

Blackberry ltd NASDAQ:BBRY

Three options for hardware

In a research note on Wednesday, analysts at Scotia Capital stated that the Canadian firm have three strategic options to choose from. The firm can choose to exit for a one-time cost of about $100m. It could also opt for licensing of the BlackBerry brand or OS to another equipment manufacturer.

Lastly, it can also choose to continue with its hardware operations provided the segment reaches profitability. The success of the Android-powered slider – Priv – has a lot of it depending on it.

BlackBerry Ltd is continuously evolving into an enterprise software provider, and in the process, could spend up to $1bn on acquisitions in the next two years while maintaining a net cash balance of roughly $500m. The firm has already spent $866m on the purchase of six firms in the past couple of years. Acquisition of former foe Good Technology for $425m in cash in November is the latest.

“A key risk is management’s ability to execute and integrate acquisitions, which could negatively affect the firm’s financial performance,” the analysts said. The analysts believe the firm could go for further cost-cutting. In 2015, it lowered the headcount to 6,225 employees from a peak of 17,500 employees in 2011.

Apple poaching BlackBerry talents?

Separately, Apple has leased a 22,000-ft space in Kanata, Ontario, says a report from the Ottawa Business Journal. The location is very close to BlackBerry Ltd QNX offices. It is not clear whether Apple intends to attract QNX employees. Chances are the closeness of the geography might be coincidental.

A building property website, which lists it as empty, describes it as a “full-floor office suite with executive boardroom, meeting rooms, several offices, server room, lunchroom, showers, private balconies and lab space.”

QNX is working on autonomous driving, and Apple might take away some of its engineering talents for its own Apple Car research, the report said. It is a common practice among the firms to buy offices near rivals in an effort to attract engineers. The employees, planning a change, but not interested in relocating are likely move to the other firm.

QNX’s automotive talent is related to cars, and therefore, it is possible that Apple is interested in it. For its secretive electric car project, Apple is exploring self-driving elements, but how important the role will autonomy have in the firms first products is not clear for now.

In pre-market trading today, BlackBerry shares were trading up over 1%. Year to date, the stock is down almost 26% while in the last one-year, it is down almost 33%.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.