BBM for Everyone!

Earlier this week independent analyst Ed Zabitsky of ACI Research launched coverage of BlackBerry.  He has a strong buy rating on the stock and a $20 target price.

It’s worth pointing out that Zabitsky is not your typical analyst.  Not only because he runs his own firm and doesn’t do any trading or investment banking for clients. But also because he picks stocks almost exclusively based on technology product transitions. This means he doesn’t do so-called “channel checks” or anything remotely close to this. Instead, he works way harder than anyone I know to deeply understand the moving parts in the tech industries that he covers. Usually this means he can talk to you for hours about topics that Wall Street analysts don’t understand at all.

His deep understanding of product cycles has lead to exceptional results. He is pretty much the only guy I bother to talk to about short term trading ideas, largely because it is not my forte while his focus on product transitions has lead him to the correct conclusion on a stock more times than I can count.

He’s probably best known for his sell rating on Apple at a time when nobody else was bearish. In January 2012 he declared “A Whole New Galaxy”, rightly calling the rise of Samsung.

And now he thinks BlackBerry shares are ripe to be bought. His reasoning has nothing to do with Q10 or Q5 volume, rising gross margins on hardware or anything that most analysts talk about. Instead, he’s bullish because of cross platform BBM (which he calls “long overdue").

Interestingly, in a world where so many pundits see cross platform BBM as “too little too late”, Zabitsky isn’t comparing it to WhatsApp or other mobile-only platforms.  He seems (rightly so) more interested in the potential decline in Skype’s dominance. He points out that Microsoft, after buying Skype, has not done much in terms of cementing deep carrier relationships. He points out that this leaves the door open for BBM, and it’s quite evident that he’s now bullish on BlackBerry because BBM for iOS and Android will hit the market this summer.

The technology transition that Zabitsky thinks BlackBerry might be able to ride is that of OTT (over the top) communication apps on LTE networks. WhatsApp is a leading multi platform text chat tool. Skype is a leading multi platform voice and video chat tool and I never hear people talk about Skype as a great mobile text chat experience. BBM has the potential to deliver an amazing voice, video and text chat experience on all platforms, and BlackBerry might do a better job of cementing carrier relationships.

Personally, I would love to see BBM become the most popular way to communicate on mobile devices in the world. They already have the most reliable text chat platform and pretty darn good voice and video performance in a BlackBerry-only world. Take this cross platform, perhaps give me push to talk voice and video, and we could absolutely have a Skype, WhatsApp and Voxer killer on our hands. 

Ultimately, Zabitsky sees BlackBerry exiting the hardware market and establishing itself as a high value cross-platform web property. It’s refreshing to see someone talking about something other than OS market share and next quarter’s shipment numbers.