When Ed Zabitsky of ACI Research launched coverage of BlackBerry last July, the stock has just collapsed from over $14 to below $10. Zabitsky saw the cross-platform BBM story as highly attractive, despite understanding that the enterprise revenue model was going through a big transition.

Zabitsky has just published a brief note reiterating his strong buy recommendation and $20 target price. My understanding is he wasn’t making a short term prediction on the stock price, nor is he doing so now.  That’s not how he operates.  He thinks about product cycles and balances his research along with what the Street is actually expecting, and pricing into the stock.  

How has his call worked out after 8 months? He’s up slightly but obviously still feels there is more to go. Initially he argued that BlackBerry would exit the hardware business. He figured it would happen in two stages, with the consumer exit happening first.  This first state has pretty much happened now that Foxconn is taking over that end of things. It remains to be seen if the company inevitably exits the hardware market entirely. I’m not convinced it will happen, but if they don’t succeed in recapturing hardware sales in regulated markets I can see how this would take place, pushing BlackBerry into the realm of a pure software / services company.

In terms of what’s coming next, here are a few points taken directly from Zabitsky’s note along with my thoughts.

The upside potential for Blackberry shares is driven by BBM’s growth into a full-fledged competitor to Skype with full presence capabilities (IM, voice and video) with strong ties into the enterprise. BBM 2.0, released last week, takes their Android and iOS offerings beyond the messaging market and into VoIP and improved file and photo sharing. Combined with Blackberry’s unparalleled security of communications, this should make them more successful in advanced smartphone markets.

My take: I completely agree with this as a major opportunity. Zabitsky is actually the guy who got me thinking along these lines and is why I’ve been pushing so hard to have the company integrate more core functions such as instant text, push to talk, along with live (synchronous) voice and video. It’s a long road from vision to reality, but someone has to be the winner, and I’d love for it to be BlackBerry if at all possible.

The value of cross-platform BBM is underscored by Facebook’s $19 billion acquisition of messaging competitor WhatsApp. Facebook will have the arduous task of integrating their own offering with that of WhatsApp. Clearly this acquisition is meant by Facebook as a land grab in the consumer messaging space. While Blackberry’s software and services segments have always fit nicely into Microsoft’s enterprise offerings, it was not until Facebook’s $19 billion wake-up call that we considered acquisition by Microsoft to be a near-term possibility.

My take: This is an interesting angle. Skype just doesn’t seem to have that super fast and elegant flow to it on a mobile device. It was build for the PC, and adapted to mobile, unlike BBM which was always designed as a mobile client. I always thought I wanted Skype on my phone until I had it, at which point I never found myself using it. BBM, on the other hand, I dream of having it replace my need for phone calls, text messages, voice messages, and video. If Microsoft sees it this way, perhaps they’ll get serious about acquiring BlackBerry.