Will BlackBerry see a massive short squeeze when the Q10 is in full swing?

By Chris Umiastowski on 8 Jun 2013 08:27 am EDT
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Despite BlackBerry doing a pretty solid job of rescuing itself from what would otherwise be inescapable death with the launch of BlackBerry 10, the stock market continues to bet against the company in larger numbers.

As of mid-May, a grand total of 170.6 million shares of BlackBerry were sold short out of a total share count of 515 million. Shares that are sold short have been sold by someone who borrowed them, sold them, and must buy them back later. The shorter is betting the stock will go down, profiting on the downside just in the same way that a normal shareholder profits from a stock’s upside.

The amount of shorted stock is almost mind blowing. Keep in mind there are a few large shareholders out there such as Prem Watsa and Mike Lazaridis who aren’t trading at all. Thompson Reuters reports the “float” at 485 million. Float simply means the number of shares available to be traded (i.e. total shares excluding restricted shares such as insider holdings.)

Doing the math on this, it means 35% of BlackBerry stock is sold short. That’s a hugely bearish sign.

Either the shorts are right, or BlackBerry is on a comeback path and it’s about to get very painful for the bear crowd. Time will tell. But it’s quite obvious that a huge short interest alone does not mean the stock is headed south.

Just look at Tesla. In March the short interest was 32 million, while the float was about 74 million. Tesla’s share count is higher than 74 million, but Elon Musk, the co-founder and CEO, owns 24% of the company. Anyway, those following the Tesla story have seen the stock surge from the mid $30 level to over $100 since this peak short position. In other words, the shorts have witnessed a tsunami of pain since that time. But it hasn’t stopped them. Tesla’s short volume was still 23 million in May. Down, but still huge.

So here we are. The BlackBerry Q10 is in US store shelves. The reviews have been stellar. The average selling price (ASP) is attractive from the company's perspective. The gross margin is bound to be strong. I think BlackBerry is setup to post some very strong financial results in the coming months. But I could be wrong. We could be seeing a huge drop in subscribers as BBOS users migrate away to cheaper Androids. We could be seeing a higher than expected drop in service revenue. A bunch of bad things could be happening that I’m not pricing in.

But I think the typical short seller simply believes that BlackBerry can’t survive in a world powered by iOS and Android.

The next set of financial results will come out later this month. But until then, BlackBerry will be on the defense as Apple hits WWDC and releases iOS7 ... and who knows what Android has in store for now.

Anyway - it’s interesting to talk about short term stock dynamics, but they don’t really matter to the business. Thorsten and team are running the company for growth and success, and that does not mean pleasing Wall Street in any particular quarter. It means executing on a long term strategy.

Just like Tesla showed, short volume can be irrelevant. Produce great products and sell them at a profit. Focus on your customers. The profits will follow, and the stock market will follow further behind. Short interest is an expression of Wall Street’s opinion. That opinion isn’t always right.

190 comments

jojo beaconsfield

With many sales coming from other platforms ,we might see an increase in subs.Thorstien's comments on the success of BB10 have to be taken seriously ,or he would be in big doo doo for making false statements.I think after 1 year at the helm he would be very foolish to jeopardize his position and reputation.BB is back!!

SuperionMaximus

I don't think anyone is doubting Mr Heins' word when he said that roughly half of all Z10 sales were coming from non-BlacBerry users. I'm certain BlackBerry is monitoring this closely.

What Chris means is that if BlackBerry 10 sales are lets say 3 million so far (I have no idea it's just a random number) it means that NEW business from other platforms coming to BlackBerry is around 1 1/2 million.

If legacy BlackBerry OS is collapsing at an increasing rate (and we have no reason to believe it isn't) they may have lost 8 million service revenue generating BBOS customers (again, no idea just a random number).

That would mean that BlackBerry is losing customers at a much higher rate then BlackBerry 10 is bringing them in and that service revenue is plummeting at an accelerating rate.

This would be a bad sign. While BlackBerry has clear plans to replace BIS revenue from other sources - such as the new fee structure for BES 10 and the newly announced automotive OTA capabilities in QNX Car 2.1 - these revenue streams will take time to ramp up and overtake the revenue currently generated from legacy BBOS customers through carrier fees.

So if customers are leaving faster then they are coming in, and the ones headed out the door are profit generating while the one's coming in aren't, and the plans to replace the revenue that the departing customers are taking with them are still on the horizon, the people who are bearish on BlackBerry will start reciting the company's eulogy again.

Now, even if this is occurring and BlackBerry is depleting it's cash reserves - as Mr Heins indicated they would - it still doesn't necessarily mean the company is finished. Mr Heins himself has stated publicly that he fully expects BlackBerry to use around 1 billion of it's cash on hand during the transition period from Legacy BBOS to BlackBerry 10 and new M2M business growth. BlackBerry is predicting that there will be a period hurt where more people are leaving then coming in and that they will need to use some of their cash on hand. BlackBerry has plans for BB10, through BES 10, Automotive and Health Care M2M business, BBM channels, and more, to more then make up for lost service revenue. The only way that BlackBerry is in trouble is if the collapse of BBOS happens much faster then they are able to ramp up these other businesses.

iwasspartacus

Thank you for that post. Very interesting commentary.

Posted via CB10

jojo beaconsfield

I see your point, but I thought that the service revenue would be around, for about another year, as many people are on contracts.and,what about increased revenue from the phones themselves? BB wasn't making much on their older products.

SuperionMaximus

Yes of course the service revenue from BIS will be around for some time to come yet, likely years. That's the whole idea. Manage the decrease in revenue from legacy business while ramping up the new lines of business and revenue streams. But if BlackBerry OS sees a sudden mass exodus then that will cause a problem.

Of course short term, they are squeezing profits from hardware sales. This probably won't last long term though. They are banking on support from BlackBerry loyalists like us right now selling their devices at high prices. The market will only tolerate this for so long if they aren't selling huge numbers. I have full confidence that BlackBerry knows this though.

They have a product mix planned to cover important categories and it's going to be a steady cadence of refreshed hardware and software development that will grow the consumer business back. Personally, I'm not to worried about their future plans as they seem to have a pretty comprehensive long term strategy for hardware, software, and services.

It's just about how fast they can execute. The competition is fierce in mobile and if the legacy business collapses and they can't sell BlackBerry 10 phones fast enough for one reason or another, or they can't ramp up their QNX services business fast enough then they could be in trouble. I don't think they are though.

theRock1975

Bis subscriber revenue varies in different countries. In north America, bis plans were $5 and revenue was shared with the carrier. So say bbry got $3 per user per month and in other countries they got significantly less, this revenue is not going to make or break blackberry.

This revenue is high margin and came in very handy during their transition.

The picture has changed dramatically. Now they will be gathering license fees and revenue from android and ios users on bes10. The number of android and ios users gained on bes10 will far outnumber the users lost on BIS In emerging markets.

Even if i'm wrong, you must consider the added app world revenue, music revenue, and hardware revenue coming from bb10 platform. Seriously, I'm spending 50x on bb10 apps, games, ect.. than I spent on bb7.

Imo, this whole subscriber number is just a scapegoat for the shorts. Let's keep an eye on eps and book value. In the end all that matters to a shareholder should be what is the company worth right now and what will it be worth.

Posted via CB10

FunGuyLover

Ditto this, and add that growth potential far exceeds lost BIS revenue. Staying with the old "Collect a few bucks a month and practically give the hardware away" model would have been a death sentence.

BlackBerry has set the table for a feast. They're going to feast on other hardware makers' popularity through MDM. They're going to feast on hardware revenues by positioning the excellent BB10 line as a premium brand, thus avoiding the shrinking margins faced by competitors in a crowded market. Et cetera.

It's going to be one heck of a ride up, much like Apple from 1998-2009, from death's door to massive international success.

Short squeeze? Probably, but not necessarily in the next few weeks or even months. A year from now, the long view will have paid off handsomely, I reckon.

Posted via CB10

BlackBerrari

And in order to generate income from license fees through BES for securing iOS and Android devices, the crucial question and a big risk factor is: How fast will it come to these platforms? It depends also a lot how fast appl and goog will adopt it in their stores... don't think that they're in hurry...! I hope the Tmobile tweet gives at least a sort of time frame... :-)

Posted via CB10

OttawaLarry

What is the definition of a "subscriber" for BB? Is it = BES + BIS users? I think most people are confused with the term subscriber that BB reports. This is quite misleading. Apple and Samsung do not use this term. As long as BB is making profits, who cares about the no. of subscribers? BB has to change the way they report users or not all.
Can someone clarify this?

BlackBerrari

This is why they won't report the subs figures anymore... Thanks Thorsten :-)

Posted via CB10

OttawaLarry

So you mean Q1 won't report no. of subscribers? I'm not sure yet. This is an excellent move.
Thanks.
Posted via BlackBerry 10

SuperionMaximus

Yes, BlackBerry subscribers is the total number of BIS + BES users for legacy BB OS. Unlike anyone else, BlackBerry was able to collect fees from the carriers per BlackBerry user. Some carriers charged these fees directly to the customer and some just hid them in their regular service plans.

While BlackBerry still offers some of it's services to BlackBerry 10 customers, they do not collect carrier fees because BIS is gone and the way BES is managed has changed.

JakeTheCat

Re: Subscribers and "Apple and Samsung do not use this term" because they operate on different business models. Apple sells hardware (one time) and an apps/music/etc. ecosystem (periodic) while Samsung sells hardware (one time). BlackBerry operates on a recurring revenue model, selling a service that is subscribed to. This is why it has always been stupid to compare Apple, Samsung, and BlackBerry directly without adjusting for the differences in what each was trying to accomplish. A BlackBerry handset sold at low (even zero, or negative) margins can still be a very profitable for BlackBerry over the years as the user ends up paying a monthly fee - either directly or indirectly - to BlackBerry at very high margins. As noted above, BlackBerry is transforming its various service models, but TH is on record as saying service revenues are not going away and, in fact, he hopes service revenues will grow.

AfroZepher

Agreed. . .BB10 device gross margins seem up the task of making up for the lost legacy BBOS revenue but again. . .this is a short term solution... revenue from services will save BlackBerry in the long term

nick canada

Very good post, thanks

Posted via CB10

Cula

So you have to substract large / long-term holders like Mike and Prem from the free float too? That would then mean that probably half the actually available shares, or even more, are shorted..

Chris Umiastowski

Insider ownership like Laz and Watsa are already subtracted when calculating float.  That's exactly why the term "float" exists.

jic999

Ross Healy a BB shareholder and value investor said on BNN the shorts are paying a 9% interest rate to borrow the stock, plus their 25%-50% margin requirement to short the stock...this could get ugly either way !! Barrons reported Tesla shorts were paying 2% interest rate on their borrowed shorts and the rumour has it that some hedge funds who shorted Tesla are bankrupt , I wonder which financial bank funded these Mad Men Shorts !!

jimmyt1

That's assuming those shorts are simply holding, which is very likely not the case. They're trading around their positions and likely doing quite well.

Also, short interest doesn't take into account the listed and unlisted options positions on bbry. The short interest may in fact be an offset to a bigger strategy and there isn't a naked position. Throw in the possibility of a pairs trade, and people are mindlessly speculating on the subject.

Posted via CB10

jic999

The shorts are doing all kinds of hedging strategies, like writing PUTs on selloffs then using that income to finance their Short position margin requirements etc... but in the end the shares need to go back either at $7 or $40 ....take your pick !

barjona

Sure, but ultimately the short has to be covered. It doesn't matter if it's part of a hedge or some larger strategy, if you short at $13 and cover at $22 you're taking a loss. And the amount of stock being shorted would suggest that there are probably some people all in on Blackberry's demise. I can't wait for those people to go broke :)

koool1

Nothing better than a huge short squeeze. BlackBerry needs a blow out quarter with solid guidance. Hope to see it. I still have my 200 shares.

Posted via CB10

jojo beaconsfield

If you want to talk about a blowout quarter and Tesla,check out, Tesla Motors Spectacular First Quarter Report Is A Game Changer , May10,2013 on Seeking Alpha,by The Value Investor,no wonder the shorts got squeezed!!!

hannibalmoot

We'll see how the media responds as the report date draws closer. If we start seeing more negative and ridiculous stories, we'll get an idea how worried the shorts are.

j.goncalves

The average selling price (ASP) is attractive from the comapny’s perspective.

Company correction.

Posted via CB10

tinochiko

This is why I do business the Richard Branson way!

BBM Channels; Tech C0008DDD1 flickr.com/photos/96972071@N06/, TV -C0006E22D

R Field

BlackBerry set some bear traps up for the end of the month.

SuperionMaximus

Doubt it.

It all depends how rapidly BBOS is collapsing relative to BB10 growth.

If BBOS is declining slowly as BB10 ramps, then the stock is going to rise allot. If BBOS and service revenue is plummeting faster then BlackBerry's plans to replace it, then the bears will be shouting BlackBerry's eulogy at the top of their lungs.

FunGuyLover

It will come down to profit. If the quarterly shows a healthy head of steam, the shorts are toast no matter what happens with BIS.

Posted via CB10

jsocan

I wish. Unfortunately, unless the subscriber number starts to show a growing trend, any quarterly profit will be shouted down by the shorts as temporary from the pent up upgrade demand of a shrinking subscriber pool. Given the accelerating market share gain of cheap Android phones in emerging markets, and BB10 entry level phone still not available yet, the subscriber number in the June earning report will likely fan the fire for the shorts.

FunGuyLover

Time will tell.

Posted via CB10

holekd

Was hoping for the short squeeze last quarter...bring it on this quarter.....does anyone else think the move of BBM to android and ios is going to build into a cash cow when BBM money comes to North America?

Posted via CB10

jasonvan9

As long as they keep the price per transaction lower than what the bank charges for etransfers im sure it will take off... mind you i haven't seen anyone using those credit card readers with an idevice yet and they predicted those to be huge

Posted via CB10

holekd

True, I think it comes down to ease and convenience...if BBM money is done right and they get there numbers up it should do well

Posted via CB10

Chris Umiastowski

You talking about Square? I think it's huge already. I ordered one this week. Already connected it to my bank account and installed the iPad app. I have been bugging them on twitter to port to BB10.

Posted via CB10

holekd

Ya it is...sad to say I was in the Apple store today and I heard at least 10-12 people ask for it...and for 10 dollars up front and a ten dollar rebate upon activation it seems like a great buy...it would be a good app to port over; however, I see why blackberry might not want it to.

Posted via CB10

jic999

BBM Channels will be a cashcow, I can see a Pharma Company BBM Channels, Family Medicine Doctor BBM Channel , Pizza Pizza BBM Channels offering transactional services along with other smaller enterprise BBM channels. Myself I will open a Saxophone Music Store and music lessons BBM Channels. BBM Channels will be the best Social e-Commerce Enterprise Brand Messenger period !!

SuperionMaximus

BlackBerry is hoping that is the case.

But they aren't going to see any of that for some indeterminate period of time yet as there won't be any significant interest from major brands until Channels is:

a) multi-platform
b) popular

Right now we don't even know when BBM will go cross platform or channels will launch from beta. We also know that at first when BBM goes cross platform there won't be Channels and we sure don't have a target date for when it might show up. So while that's a plan for future revenue, if BBOS is collapsing, the shorts will singing RIP BlackBerry in unison at the top of their lungs.

Chicago777Guy

Good Article

Posted via CB10

Konfucius18

Just stay patient my fellow shareholders. There's no doubt the stock will rise again.

Posted via CB10

jimmygray

Prem Watsa is on record as being currently 100% hedged on his equity investments. Could this be part of the shorted shares?

Alex Keb

Nothing relevant in this article, seeking alpha seems to have more interesting articles on this topic and more bullish for that matter than crackberry writers.

Chris Umiastowski

Alex - feel free to simply ignore everything I write. No gun to your head here ...

Alex Keb

Why would I ignore? We are at the pivot point of Blackberries history and more than ever Blackberry needs good PR. We don't need a nanny explaining how things are and what are the risks. Trust me, shorts are doing a very good job at that. What we need are articles explaining why Blackberry is such a great company, what are the potentials and why people should buy the stock at current price.

Common guys, is this Crackberry or BGR? Stop being so apologetic and jump on the hope train! Yes we can!

angrybear123

I'd rather not read the articles of haters or pure fan boys.

Chris' articles are great because although he obviously wants to see BBRY succeed, he presents his opinions and justifies them with facts. He does not make up things, and will say both the good and the bad. This is far more useful than just pure non stop bashing or promoting.

Posted via CB10

Pixstar

+1

Posted via a BlackBerry 10 - iPhone killer device

habsfan170

Not everyone has an economics degree (like I do). Basics of stock investing and understanding market forces are helpful to many of the readers on this site. Although markets seem to be pretty inefficient these days (especially in the last 5 years) Chris does a good job of explaining the forces at work. It's ironic this article came out today because just last week I was thinking about buying some calls on this stock due to the potential squeeze. Maybe TSLA just has me all excited though...

Hidjk

Alex that's a bit of a low blow.
You and Chris both have an opinion and at times interesting things to say... (lol)

Posted via CB10 on Blackberry Z10!

Hidjk

You guys like dogs? :o)

http://www.youtube.com/embed/M21V3jIUgnA

Posted via CB10 on Blackberry Z10!

jic999

Hey Alex buddy .... Chris was the first to write a great article on Crackberry suggesting " Time to Buy " RIM at $6-$7 (article trading price). Then the Wall Street & Bay Street analysts come on board from what I saw. The Stock at that time was "666" left for dead. But Chris gave a careful overview & expertise on RIM. Well I pressed the buy button for xx,xxxx shares x $7.00 approx + Longterm LEAP RIM options to watch it run to $18. So do the math. Since, then his QNX History article is a must read, and he clarified the mis-information from the media on the topic of " Market Share of sales " vs " Market Share of Users " . But hey Alex anytime you want to contribute I will be pleased to read your information and hope it makes me money $$ .....P.S : if your comment is to Short BBRY , well that's in the market already !! here is a Saturday read for ya: http://faculty.chicagobooth.edu/john.cochrane/teaching/35150_advanced_in...

MrsNolanLRoss

Sounds like Alex needs a hug!

br14

Seeking Alpha?

Articles generally written by persons with limited experience and a vested interest. Not much in most of those articles you can trust.

Chris on the other hand, writes thoughtful, balanced articles. He's not going to be "bullish" when the company is in trouble. And right now, BlackBerry is far from "turned around". Well on it's way. But nowhere near a done deal.

Alex Keb

I don't care what anyone's position is and the rule is that you shouldn't listen to anyone but yourself. What you should take into account is bits of information that may be overlooked by analysts and this is where Seeking Alpha excels. They have many interesting articles that give you a different perspective on a company's outlook than the industry norm. And most of the writers are still part of the industry while Chris is somewhat retired...

I have nothing against Chris but sometimes his article are too dovish for a fanboy blog site, and sometimes he is too eager to defend his ex-position and the industry in general. The reality is Wall St is corrupt and the stock market is proof of that. We have historically lowest volume ever recorded in a bullish market. Why? Retail investors don't trust the system anymore. It's rotten from its core. It's all HF machines, prop traders, hedge funds and institutions who playing an elaborate zero sum game of musical chairs, and when the music stops, the seconds matter.

Thunderbuck

SA has no editorial control; they publish whatever's submitted. SA has some very good analysts who do a fantastic job of explaining their positions (even if I don't agree with them), and there are others who just spout drivel.

Personally, I read Chris U's pieces very carefully. I've seen him be supportive of BB, sure, but never mindlessly so.

THBW

Overall Chris, one can't help but be optimistic as to the direction BB is going. The product line is strong and building. There has been a consistent release of quality products into different market segments and they have been well received. Next quarter, BB will have the Q10 numbers for the US and Q5 numbers from emerging markets. Good execution. Then in fall the A10 with maybe the idea of passive tableting coming to the forefront. Then there is cross platform BBM as a potential revenue stream, QNX as the premiere OS in cars and then the enterprise servers, the best of the best. One need only read the DOD recent decision on mobile computing to realize how desperately behind the competition is.

Will there be a short squeeze? I think there will be but not this quarter. The shorts will try to squeeze every last bit of negative news out of the quarterly report they can. This we can depend on this. It is, however clear that they are getting disparate as there rationales are getting increasingly convoluted by the day.

My days of wondering whether BB will make it are over. They will do fine. If I were to project forward, the company I have greatest concerns with is Apple. The fall launch cycle better be strong or those cracks that have been showing up are going to turn into big holes.

Blackberry_Boss

What if BlackBerry was to put there M2M tech inside of Tesla vehicles. Hmm.

Posted via CB10

jic999

Now that sounds interesting, I do not have a tech background maybe Chris can comment on this !
Maybe Physicists THOR and Laz and the Rocket Scientist Musk can make a M2M battery charging satelite !

Chris Umiastowski

I'm a Tesla shareholder. It would be great to see them run QNX but I think they have done everything in house. Not sure if there is QNX in there already or not. But I think most Valley companies support iOS way before Android or BlackBerry.

Posted via CB10

JR A

I live in the great Silicon Valley (hell, I live next door to eBay's executive headquarters, literally I just open my drapes and I can see people working in their buildings...) and I have to say that the companies out here support Android just as much if not more than iOS.

In the land of engineers and tech geeks, I find more and more people who have tech/internet related jobs carry Android as that's what their company supports. About 2 to 1 in my practical day to day findings.

BlackBerry is like an urban legend out here - some have "heard of" that thing called "BlackBerry 10" but you only see it once in a blue moon when Jupiter aligns with Venus and a lamb is sacrificed on the third Sunday of the month.

It would be nice if Tesla had QNX powering that bad-boy, but I do feel that they run their own show internally. Who knows, I'm probably wrong. But seeing that they don't make their Tesla car apps for BB10, I doubt it.

Alex Keb

Tesla's future is limited, the rise in the stock is not necessarily reflective on company performance but rather the charisma and troll mastery of Elon Musk in the media who pumped his company very well. Let's not also forget that Americans love cars and they see Tesla as the next best thing. Reality still hasn't set on the stock yet, but when it does, the stock is not worth more than 30$.

I don't think anyone here can accept the fact that Tesla is now worth more in market cap than Blackberry. Yet Thor can learn a lot from Tesla CEO, it's not always about performance, perception matters deeply and even more when you are a foreign company trying to fight two giant american companies, AAPL and GOOG.

habsfan170

Alex, are you not discounting the importance of TSLA's intangibles and goodwill... market position, R&D, etc?

Hidjk

Seems to me that the American carriers are trying their best to do blackberry in by not updating/upgrading BlackBerry software when other countries have had two updates for the Z10 already. Why is this Chris? are they in with all the shorts, is someone paying them off so people will want their products (competition) instead... seems to me the big boys with all the money don't want a fare playing field. I think when the (is it) Q5 hits the rest of the world and it's cheap enough then blackberry will start to take flight, until then the powers that be will continue to play with blackberry. If it's not one thing it's another they always come up with something negative to say. I hope our friends to the south will get there updates so they can enjoy their bb10 phones as much as I am.

Posted via CB10 on Blackberry Z10!

bigedschukar

I agree with you that there seems to be something fishy going on with American carriers, and also places like Best Buy. Or at least in my area... Houston, TX. In addition to the lack of updates, there seems to be no real advertising or support going on. Every TV commercial from the carriers and Best Buy are about the usual suspects. Every Sunday I look at the Best Buy ad hoping to see anything about BBRY only to be disappointed. What gives?!?! I know us Americans are becoming more and more like a herd, but this is getting ridiculous!

VictorRight

Same crap as with obama followers. Sheeple.

Posted via CB10

Thunderbuck

There's no agenda here. US carriers run some of the most diverse mobile networks on earth. There's tons of legacy equipment, for instance, and a handset might have to operate in a dozen different environments on a given day.

This complexity is borne out in testing. It just takes longer to evaluate every scenario. Apple has enough money to certify their own engineers with the telcos and perform some of their certifications in-house, cutting the time tremendously, but it's a process that would cost hundreds of millions to set up.

parapep10

Chris, when does BlackBerry have too announce a profit warning or surprise?
It seems like the time has passed. If so, wouldn't that mean a good thing. Are they obligated to do so? Thanks

Posted via CB10

Chris Umiastowski

Normally a company would announce any significant deviations from guidance as soon as they are reasonably sure that it has happened.  Some companies warn (or announce a surprise) well before quarter end if it's obvious to them that things have changed a lot since guiding.  But most companies would do it within about a week of quarter end.  As you said (correctly), that time is pretty much done for BBRY.  The quarter ended on June 1st.  I think we'd have seen something if they had to warn / surprise.

Anyway - the real news the market will care about in the quarter is the guidance. 

jojo beaconsfield

I believe BB has already said they wld not be giving guidance a few quarters ago.they would only announce earnings.

elicash

Hi Chris, Is there any reason to believe Scotia's way above mkt view of $550 asp on BB10 units and 50% gross margins ($275/device)? when you look at Q4, to get to that number, you would have to assume asp on bb6/7 units dropped sequentially from $228 to $205, which seems unlikely...if asps held flat or declined modestly, a $440-$450 asp on bb10 seems more likely...obviously has a huge impact on forecasted margins, eps, etc. what would give them comfort in such an above market view? Presumably Scotia has better access to Blackberry people than the bearish folks but it is certainly an outlier...

sugbo

Prem Watsa's hedges are mainly puts on the S&P and the Russell index. I know for sure he's only long BB. Would be something when Heins, after very good results June 28th, declares a share buyback program if the stockprice stays so depressed. That would make the shorts really nervous. But i think thats wishful thinking coz he is, as the article says, focused on the long term and running a business.

Chris Umiastowski

If they were to announce a buyback I think it would be a signal only,not a real intention to buy. They have cash,but it isn't a strong position compared to those they battle. A buyback adds balance sheet risk. If I were CFO I wouldn't do it. If I were on the board I wouldn't approve it. Of course I'm not in either position.

Posted via CB10

jic999

No Buyback please please , work on the guidance ....the shorts will take care of the rest !

Alex Keb

Buyback is a terrible idea, a reverse stock split is what Blackberry desperately needs.

sugbo

Besides that it might weaken the balance sheet which is true, why is a buyback such a terrible idea when the share price is still under bookvalue? It adds to the shareholders value, A reserve stock split doesnt add value.

JakeTheCat

Cash should always be allocated to the activity with the highest return while taking risk into consideration. If the company has a high return on equity then cash should be reinvested in the business. If the company has a low share price (relative to book value and return on equity) then a case can be made for repurchasing shares. If the company has a low return on equity and a fair-to-high share price then the cash should be returned as a dividend. There is no reason currently that BlackBerry should not consider a share repurchase unless using the cash for repurchases limits or prevents the company from reinvesting in better opportunities within the company, or if using up the cash to repurchase undervalued shares puts the company at risk of bankruptcy.

Sumcan2

I see the short position as being around 41%. There is 524 million shares outstanding and 80 million shares are owned between Prem Watsa and Mike Lazarida. Unless they are lendings out their shares, which I doubt it, it leaves 444 million shares for trading. The short interest on the Nasdaq is 170.6 million (I am sure that the numbers don't include the TSX) and on the TSX is around 10.4 million, so there is a total of 181 million shares sold short.
The number of shares sold short on the TSX has dropped by 2 million over the last two reporting periods, while the number on the Nasdaq has increased by about ten percent. Do the Americans think that the the world stops at its borders and that BlackBerry only sells phones? June 28th will give us a big insight into the direction BlackBerry is heading. With BES10 and QNX for automobiles and many other uses, BlackBerry is not just about selling phones.

Posted via CB10

Chris Umiastowski

Yup, I ignored TSX. Good point. And for float I just used what Thompson Reuters reports. It may be off. Good comment.

Posted via CB10

mikeycollins13

I should also add that most shares owned in 'non-margin' accounts are NOT lent out. This makes for significantly smaller pool of shares.

On a sad note, Pacific Crest is a market maker in BBRY, as such, they are legally allowed to 'naked short', hence the daily bear raids with millions of shares.

Thunderbuck

Well, that certainly explains Fawcette's agenda, doesn't it.

JakeTheCat

For every share sold short there is someone out there who has purchased an additional share long... So when figuring out how many shares are in the float wouldn't it make sense to use the traditional float PLUS the number of shares sold short? Semantics I'm sure but it seems to me that relying on just the number of shares issued by the company and adjusting for shares that don't trade doesn't tell the complete picture. What I'm getting at is that there are a lot of people short this stock (say 41 out of every 100 shares) and even more people long (141 for every 100 shares). That is a lot of bullish sentiment absorbing the increased short interest.

DaSchwantz

BlackBerry should be negotiating a partnership deal with Lenovo or Sony which includes the partner taking a minimum 5% BBRY stake via share swap or open market cash purchases. Watch the shorties fry.

Posted via CB10

holekd

Even if blackberry could partner with lenovo or Sony I believe it would need government approval and with that high level of interest from foreign investors (mainly China) I'm not sure how it would go.

Posted via CB10

kupfernigk

At the moment, with the revelations (OK nothing new if you are in the industry, but they are going mainstream) about Huawei and the Chinese Government, and Apple, Google and Facebook in bed with the CIA, it would be disastrous for BlackBerry to sacrifice one of their key selling points - a genuine concern for data privacy for their users.
This may also be at the bottom of the attacks on them in the US - Uncle Sam does not care for communications companies that can operate outside US jurisdiction.
It is not only people with something to hide that want privacy. Anybody handling personal or corporate data within the EU wants to be sure that it is not being passed to third parties that do not have a right to it under our data protection laws.

Thunderbuck

No, but I do think licensing, with no equity stake involved, could be a very useful strategy.

DaSchwantz

I'm arguing for licensing WITH an equity stake. A small equity stake (5-10%) would still fry shorty, wouldn't requiregovernment approval, and wouldn't result in any security concerns.

elicash

Its unlikely they will be able to report unblemished results even if earnings beat, which will be a challenge in creating a squeeze. If subs fall like they did last Q, i doubt the stock moves much higher even if they beat signficantly on earnings and provide decent guidance. Its also possible cash drops (though not significant) given payables increased $400mm last quarter which helped them hold cash steady at $2.9Bn. I don't think shorts will cave unless they can really bring in new insitutional longs and they still remain largely on the sidelines.

VictorRight

I respect BlackBerry for not getting involved in our politics. No donations etc.!

Posted via CB10

Thunderbuck

As much as I'm long BB, and I'd like to say you're being pessimistic I think this is a realistic outlook. The scenario that's looking to play out here is that BB10 gradually gains a foothold. Enterprise seems pretty enthusiastic about it and that might just be enough to keep it plugging along for these first few quarters.

As BB10 establishes several million subscribers I think we'll hit a tipping point where the shorts will finally have to bail. In the meantime, BB will continue to be profitable, and critics will continue to take issue and claim the profits aren't sustainable.

elicash

Major upward revisions in earnings and unit expectations since the beginning of January have done little to propel the stock higher.

Swigzers71

BlackBerry stock will never be stable and in positive numbers until they once again establish themselves as worthy for someone to put 200,000 into the company. It would still be risky business for anyone to invest, once we see more phones coming out and tablets and a wider market in general there stock will stay the same, or get worse.

Posted via CB10

Supa_Fly1

It's gotta start somewhere.

Posted via CB10

Theo Groenevelt

Dont fully understand all the terms and methodolgy. But to a lay person, bbry looks to me as a company about to go into a lONG upswing. With licensing of bbm, qnx in vehicles, the Q5 (which IMO will simply KILL), this stock will go significantly higher. bullish I am. Buying 200 shares I am as well. Still the best & most secure E-mail platform on the planet...especially w/BES

W/my Q10 - CB10

VictorRight

Agreed the potential is great. BlackBerry needs to do more marketing here in the USA. Every time I show my Z10 off to anyone, none of them knew it existed but we're very impressed with the demo. I know I changed more than a few hearts.

Posted via CB10

bekkay

"Short interest is an expression of Wall Street’s opinion. That opinion isn’t always right."
The opposite is true as well. The long-term outlook of management is also just an opinion, and that opinion isn't always right.

buylocal_getaBB

Thank you doctor obvious.

An opinion can be wrong, got it

Posted via my Zed (not Zee) 10

adonesc

This is what happens when we take our advice and guidance from "market analysts" and "stock traders ", read parasites and charlatans, people who don't do or create anything tangible or of consequence for our society. These so called experts are the same people who pushed the world economy to the brink of collapse in 2008...all the while using our money...they got their bailout and are doing just fine now, back to record profits once again. The rest of us are left trying to etch a meagre existence on the ever expanding outskirts of exclusion.

Of course we have only ourselves to blame for in our eagerness to embrace greed and easy profits, we idolised these men and women who became our modern gods of property and plenty.

These people's loyalties are as fickle as the almighty market whose altar they worship. The prevailing winds say that now for whatever reason or based on the powers that be they, must absolutely work against BlackBerry. So that's what they will do.

If BlackBerry made a phone that wiped our arses and gave us a shave at the same time, it still wouldn't be good enough. Then again what do you expect from people whose modus operandi is Gordon Gecco 's resounding slogan "Greed is good"...

Posted via CB10

Hidjk

Matthew 6

19 "Don't store up treasures here on earth, where moths eat them and rust destroys them, and where thieves break in and steal.
20 Store your treasures in heaven, where moths and rust cannot destroy, and thieves do not break in and steal.
21 Wherever your treasure is, there the desires of your heart will also be.
22 "Your eye is a lamp that provides light for your body. When your eye is good, your whole body is filled with light.
23 But when your eye is bad, your whole body is filled with darkness. And if the light you think you have is actually darkness, how deep that darkness is!
24 "No one can serve two masters. For you will hate one and love the other; you will be devoted to one and despise the other. You cannot serve both God and money.

Posted via CB10 on Blackberry Z10!

keypad

You my friend should write a book, as unfortunately this world is to far removed from reality to understand its predicament.

Thank-you Chris, i feel like i have gained some new knowledge, always a good thing i think.

elicash

I think short sellers view Blackberry as not dissimilar to the story of Wang Labs. The two companies were equally stubborn in their evolution and displayed hubris. A failure to adapt made them relatively obsolete despite serving a once valuable end-market before sophisticated competition emerged. Time will tell if they are correct.

Fionn

Wang Labs......you fool.

Posted via CB10

elicash

Appreciate the kind words. I'm just conveying the view of the 35% short interest group...not my personal view. Remember, this stock has fallen from $140 to $14. Be careful who you describe as a fool.

parapep10

Thanks Chris

Posted via CB10

oddboy

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oddboy

..sorry, 3 year old got a hold of my BlackBerry.

Let me translate:

Great article as always Chris.

My daddy loves his BlackBerry and when I grow up, I want one too! I already have a PlayBook to watch Dora the Explorer and Snow White on.

ibpluto

LOL!

Posted via CB10 from my awesome Z10

Supa_Fly1

Lmao! Well your 3 year old has some mad typing skills even paragraphs already! There is an interesting learning game out there.

Posted via CB10

lynxs_claw

So how does you 3 year like gestures :)

Shobhit pathak

Infact my 28 month old can operate it without any problems as she can swipe up, choose videos, play bubble breaker, even get to her own side page by swiping right to left for all her colour books and ABCD's .....it is an awesome device as learning tool and bed time reading.....BB are you reading that, thats where your loyalist start give us BB10 on PB...

Hidjk

LOL

Posted via CB10 on Blackberry Z10!

RIMs-Pegasus-2012

Ugh highly

As they say...even a pack of monkeys with a keyboard will eventually type the bible :)
Did the 3 year old make a breakthrough "RATING" exclamation as pointed out HERE:
BbbbbbnnjjjjjjjjjjkklllllpklLkkkv kbjv. I; iv J vjv. Ugh highly

Is that a 3-Star Ugh or 5-Star Ugh? :)

Hidjk

Proverbs 2

1 My son, if you receive my words, And treasure my commands within you,
2 So that you incline your ear to wisdom, And apply your heart to understanding;
3 Yes, if you cry out for discernment, And lift up your voice for understanding,
4 If you seek her as silver, And search for her as for hidden treasures;
5 Then you will understand the fear of the LORD, And find the knowledge of God.

Posted via CB10 on Blackberry Z10!

iamaragingtornado

Great article, thanks.

Posted via CB10

Parthiv Shah

Chirs-A few questions based on your article:

1) Do you think there are some intentional shorts who want a short squeeze as they have a bullish options position and their risk reward is more attractive if they contribute to the short positions and then make a hell lot of more money via leveraged options bullish position. Is this possible? Can you or your team find this out looking at options positions?

2) Can we know the average price at which these short positions are hanging there? Is it $20 or $15 or $10. Lower this price bigger the squeeze. Like for long position we all know Mr. Prem Watsa's long is averaged at $17 something.

3) In Tesla Eon Musk did some fantastic tricks to scare the hell out of the shorts via his tweeter feeds and 5 announcements. Can BB take advantage of the same?

4) We also got a short squeeze in Netflicks where their business was deteriorating and their EPS beat was hardly anything. But still the squeeze was massive. That is thanks to an investor like Carl. Can we have a similar situation in BB with even a better EPS valuation.

elicash

2) the average price of a short is irrelevant. Its how your short position does relative to your long position (s). i.e if a fund is long Google (popular long) and short Blackberry (popular short), they would have made a nice profit this year...bbry up 16% but Google up 26%. postive 10% spread with mkt risk out. The idea that shorts are under water on bbry is a retail investors misconception about shorting. almost all shorts have offsetting longs and vice versa.

kupfernigk

Ah well, another market myth to explain the behaviour of traders.
No, sorry, if your short bet is bad you lose money. If you are long Google and short BB, then if Google goes down and BB goes up you lose twice. It does not follow that if Google goes up Blackberry must fall; the entire technology market might rise or fall as a whole.
The long/short bet only makes sense where the stocks are related in opposite directions.

elicash

The point of the hedge is to eliminate the market risk or the risk of the entire technology sector rising or falling, and isolating the performance between Blackberry and Google. If the company you are long goes up more than your short in an up-market and goes down less in a down market, then you make money...

barjona

I'll admit up front that I haven't researched the correlation of BB and Google but I'd wager that your "with mkt risk out" statement is way off. And of course it matters what the average price of your short is. Let's use your example (50/50 short BB/long Google) and say there's some good news for BB and stock price goes from $14 to $21, you would need a 50% increase in google just to break even! Just because you've got a hedge doesn't mean you'll do well in all markets, if your short gets killed you're long probably won't be able to make it up and you'll lose money.

And Parthiv, I would find 1) to be a fairly rare position, while I'm sure most people with short positions have some options to hedge if you're betting for the company to turn around and think your call options are going to be your money makers you'd only need a few short positions to hedge. Since there is a massive short position on BB I think it's safe to say that there are some people out there betting heavily against BB.

elicash

I've worked at a long/short hedge fund. From your comment, you clearly haven't. market risk, refers to general market risk not stock specific risk. the point of a pair trade is to eliminate risk from broad or sectoral market movements and just be exposed to the risk between the two securities in question. Of course, you could still get it wrong in that your short outperforms your long in an upmarket and lose money, etc...i never claimed otherwise. I was simply pointing out that shorts are not necessarily losing money on this trade and might even be making money year to date if their longs have outperformed blackberry. Retail investors seem to be under the false assumption that shorts are losing billions on this trade, which is comically false. they've weathered the launch hype etc. and now the stock has settled back down with uncertain catalysts going forward. Hedge funds don't bet the farm on short positions...these are typically 0.5% or 1% weights in their funds...maybe 3% if they were aggressive. The only people that bet the farm on securities are retail investors.

InWithTheNew

I believe the float numbers listed in this article are a bit off. Prem owns about 15% of BlackBerry shares right now. Former CEO has about 5% or so of the company. So roughly between just those two individuals that's 20% or let's just say about 100 million shares. Short interest percentage is higher than 35%!!

Posted via CB10

maxdaniels

I agree with the comments stating that next set of financial results will not be very relevant for BlackBerry's future.

I don't believe it will show huge swings on either the positive (let's say 15 million BB10 devices sold per last quarter) or on the negative side - (like a 30% catastrophic drop in subscriber base coupled with insignificant amounts of BB10 sales).
I believe we will see, probably, a relatively mild drop in subscriber base (less then 5%) and decent sales of BB10 devices (7 to 10 million).

The Q2 2013 results will be the real test for BlackBerry's viability.

SuperionMaximus

Yeah, I feel the same.

I suspect that net subs will be down a bit maybe another 2-3 million but that decent sales of BB10 with good margin and net profit will show positive trends going forward.

The Q5 and A10 will both be big products and BB10 will continue to ramp up through the year to well beyond the rate of legacy BBOS decline and into next year we will start to see new lines of business (BES 10, M2M, BBM money and Channels Revenue etc) start to take the place of declining carrier fee revenue.

The long term strategy is sound in my opinion. The only thing that they may sting them a little and allow Microsoft to take over their spot as the 3rd major ecosystem permanently is their complete lack of a tablet strategy. Mr Heins may well be right that Tablets are a fad that won't last, but they will be around for this decade anyway and are an important part of the market that it is short sighted to over look. Even if the BB10 tablet is a loss leader it would be worth it to have dog in the fight. I don't think not having a tablet will bankrupt the company, but I do think it could cause BlackBerry to slip permanently into 4th place which would make it that much harder to attract big apps.

Geeoff

Good comments.

I also feel that this earnings report is not the most important. The subscriber base will fall (hopefully not by too much) and the BB10 sales will slowly increase. It would be nice to see blowout BB10 sales, but realistically, I'm not expecting this. As long as they increase the base, then I'm happy.

Next quarter will be more interesting.

By the September Earnings Report the Z10 and Q10 will be established. And we will get a better indication of large corporate buy-in. As well, BES10 will be in better shape.

Hopefully they hold on for now and continue to pump out new products over the next three months.

And they need a tablet! Even if it is just a large Z10 without a phone attached.

alfasedanman

I'm not a financial guru by any stretch of the imagination....but I do know a good product and a good company when I see it. So do many many others...
I believe blackberry will beat all the media negativity and not only survive, but prosper.
BlackBerry by choice BlackBerry for life......

Posted via CB10

paulmike83

Long Live BlackBerry

Posted via CB10

fast666

Would love to make money on short squeeze

BBMC Channel Exchange C000D3759

XDrew42

Someone told me that Nascar will be switching out to another platform. Guy said they weren't upgrading the BES due to the high price.? I asked if I could have his 9900 when they did. Lol.

Posted via CB10

LordDraco

Blackberry (RIM) is for sale. Current shareholder fight to increase BlackBerry value. While The potential buyer building efforts to buy BlackBerry on garage sale price. Its just business as usual.

Posted via CB10

SuperionMaximus

Who are the bidders? When did BlackBerry announce they were seeking a buyer?

They turned down a 3.5 billion bag of money from Microsoft last year to switch to Windows Phone, I am pretty sure they are focused on executing their in house strategy with BB10 to generate long term shareholder value and continue to grow their own business as opposed to sell out.

nsurace

The title is continuing technically: 13.5$ had a big support and began to grow. This is a great time if the stock continue to hold this support. I was short and I have changed my position after testing quote 13,5$. Now I'm long to quarterly data.

1REDRUM

If you do not want your shares shorted against you call your Broker and have them put them in your name. Many people do not even realize others are using your own shares against you.

Posted via CB10

oneinfiniteloop

@LOCOSDEL136org, on one hand it is good to see that AT&T is running "out of stock" with the Q10s but on the other hand it also means that somebody has way underestimated the demand!

SuperionMaximus

That's likely the carrier. AT&T appears to be taking a cautious approach to BB10 and likely isn't placing orders bigger then what it thinks it's business customers demand will be for the Q10.

AT&T is pushing the Z10 hard in it's latest commercial though

Blackberry_boffin

Thing is at current levels BBRY stock is still safe (based on both best and worst case scenerios)
What amazes me is that BBRY have (finally) launched BB10 and two (soon to be three devices) which haven't been disastrous in the market place without running in the red for ages but people still query and bet against their livelihood at a basic level.
BBRY unlike most of its competitors own a majority of the channels and processes their business rely on and have (reasonably) sucessfully launched an all new OS, ecosystem, and devices without running horrendous debts in today's cutthroust smartphone (call it mobile cumputing if you want ) world and now seem fairly stable.
So it beggars belief that in the long term people still want to bet against them with all the assets they have.
Only time will tell.

SuperionMaximus

BlackBerry is definitely cheap if you consider all their assets and potential new business outside of mobile phones with the new QNX based platform.

QNX, TAT and the BlackBerry NOC is a dream combination for new business outside of smart phones. Microsoft is pretty much the only company that even can compete with BlackBerry in the embedded OS market now.

It's extremely doubtful that BlackBerry as a whole will go under, be sold or broken up. But I don't know if they are doing enough yet on the consumer side to ensure that have a fighting chance at overtaking Microsoft in the smart phone market. Time will tell.

Made in flanders

Great article Chris, as always!

Why isn't shorting prohibited by now?

Chris Umiastowski

I think shorting is a totally legit way to invest. I'm short stocks right now. It is a good hedge and it is a good way to profit when you think a business is doomed, if you are right.

Posted via CB10

jojo beaconsfield

HAVE YOU? shorted BB as an insurance Policy?You do own an Ipad ,and an Iphone, and have bought Square!!! What gives?Pls respond and tell me because it matters!!50 Bucks say
's you won't

Chris Umiastowski

I'm months behind (didn't see this until today, researching something for a followup).  You owe me $50.

I've never shorted BlackBerry.  In fact I've never sold a single share.  I'm still long the stock. I've been a shareholder since about 2000 and I've only added to my position (in 2011 through 2013) since then.  Obviously I was up large for a long time.  But since 2011 I've been dead wrong on  my assessment that BlackBerry would retain the #3 platform position in the market.  I bet on  that by buying more shares, and it's been a losing investment.  I retain my position now to see if they can turn it around under Chen's control as a software / services play. Plus I think BBM is a free call option that we're not paying for in the stock.

I own an iPad (first gen, it's getting OLD).  Duh.  If you want to follow this sector you must be familiar with the products.  You being offended by the sound of this is hilarious.  It's like th BBRY culture where management never tried out competing devices, so no wonder they were totally blindsided by Apple.

iPhone:  My wife owns one.  I had an original (1st gen) iPhone in 2007, and it was purchased as part of my research (proved to be VERY useful for showing it to clients, doing competitive analysis, etc).  I actually lost it on a plane (left it behind) sometime in 2009, and have never owned another iPhone since because I didn't feel I needed to (we had iPod Touch devices in the house already, and an iPad)

I own a Square - duh.  I run a small business and I thought it would be smart to test this sucker out.  How does this relate in any way to BBRY?

Stocks that I've shorted:  Qualcomm, Nokia, JDS Uniphase.  I rarely short.  But it's a legit investment modality.

Now let's see if you make good on your $50 offer :)

 

romulusiulian

Wall Street, IMF and so on, of they don't have any profit in deals concerning financial things (I'm not a pro) they will sell you only bad end stories or better said visions. Not interest no support.
I will wait and see. I think they are wrong and afraid of the market competitor that BlackBerry is.

Posted via CB10

kupfernigk

I think it was relevant but perhaps not yet digested that Blackberry have a new market for Blackberry services just starting up - the remote deployment of software upgrades to cars over their network. Think of Apple or Google trying to sell such a service (iTunes on your engine management system?). Remote software car upgrades needs a highly secure network but not one with 100% availability. This is potentially a very big market. It would be galling for Google if their aim of developing self driving cars ended up being dependent on Blackberry's network to deploy updates.

SantaBerry

Chris, do you hold any BlackBerry shares?

Chris Umiastowski

Yes. Have for over 12 years now.

Posted via CB10

Supa_Fly1

These articles are great, but we need to focus along with BlackBerry's long term goals and what is being done to achieve them:

Subscriber Growth: Q5 being paramount to this especially in low cost smartphone fight against competition.

Mobile Computing Platform: bes10 is in place, automotive security and management is in place looking for buyers, NOC is more than ready, but what of providers networks and partnership? Who are the protective clients beyond Mercedes that BlackBerry is courting/after?! When is the target revenue from this business supposed to occur (estimated)?! !

Marketing: sure we know of a unified approach, but how will it help in terms of sales of units, business clients for.mobile computing etc in various languages and countries? Are they any constraints to sales tax or shipments in countries such as the difficulty we see in Brasil? How much spending is going to marketing qtr/qtr yr/yr?! Statistics on effectiveness of marketing!? Will BlackBerry leverage their F1 partnership in marketing their BlackBerry lineup?! Outside of BB LIVE.

We need to see this information and spread it out more, I think consumers are more savvy than in previous decades and pay more attention to these things.

Where is my commercial showing a BB10 device getting information or setting up a map route for a Porche 911, a Bentley Continental, a Jeep, or even an Audi E-Tron charge status?! When will we see companies showing management and updates remotely, securely, and sagely using BlackBerry Automotive Management?! More importantly will this matter, and will this affect brand image BlackBerry can use to affect partnerships, revenue and BlackBerry device sales?!

Posted via CB10

Jimcmf

Hi Chis,

A balanced write up.

Three things. The 170.63 Million short shares that you speak of DOES NOT include the shorts on the TSX. Should you not be including Short Shares on the TSX in your figures?

Next ... Why would people be shorting shares where the short position is below book value, AND the company has not been burning cash, but accumulating cash? Is there no other company listed that is in a worse position that these shorts can move onto?

And finally. I see that available short share ARE VERY FEW AND FAR BETWEEN ( http://www.interactivebrokers.com/en/index.php?key=bbry&cntry=usa&tag=Un... )

Is this a good sign?

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BlackberryFan777

I think the bears are primarily betting that the future of mobile computing will parallel the past of desktop computing. Not too long ago, there were several competing platforms in the desktop space -- Commodore, Sinclair, TI, Atari, Apple, PC, etc. -- but consumer attention span and critical mass in developer ecosystems was only big enough for two to remain standing: PC and Mac. It seems to many, many people that something similar is happening in the mobile space. In sum, the belief is that there can be only two... and it looks like those two will be Android and iOS.

The trend of inevitable domination by PC and Mac of the desktop computing market began in the United States and spread to much of the rest of the world. Although, Linux is a third option popular in some parts of the world today, real commercial competitors are almost insignificant.

My guess is that BlackBerry needs to distinguish themselves from this historical observation by showing good sales numbers in the United States. After all, performance in the US is the foundation of the theory that there can be only two significant platforms and BlackBerry is in a race for third.

My guess is also, sadly, that U.S. sales figures will be a surprisingly low percentage of overall sales for both the Z10 and the Q10. The retail sales aspect of the launch was... well, we'll see.

Posted via CB10

SuperionMaximus

People keep saying there can only be two or three platforms in mobile, but there's no proof to back it up. The mobile computing market is still young, around 15 years old. Since the beginning there have always been 4 players and the market is still growing. At the start there was Symbian (Like Android of it's day), Palm OS (like iOS of it's day but not just limited to Palm Harware), BlackBerry, and Windows Mobile. Palm's dead. So is Symbian. They were replaced in the market by Android and iOS. BlackBerry and Windows Mobile were reborn as BlackBerry 10 and Windows Phone.

Android is dominant but fragmented and Google might put Chrome OS on Tablets and phones and Samsung is dabbling in Tizen. So things could shift around a little over the next couple years if Google pushes Chrome on phones and if Samsung has any meaningful degree of success with Tizen.

iOS will probably stabilize at around 15 - 20% global market share unless they do introduce a low cost iPhone for emerging markets. iPhone sales can't continue to grow indefinitely at their current price.

Neither of the two market leaders is in a position right now to ensure dominance forever. If iOS 7 isn't enough of a change Apple is definitely vulnerable to continue to bleed market share as consumer boredom with their products will likely continue.

Supa_Fly1

Symbian is actually not dead. Nokia STILL till this day ships Symbian OS devices under names like ASHA etc. It's still quite powerful, supports Python and Ruby apps as well natively. But for all intense & purposes its pretty much dead and nobody is really coding for it; but we must thank Nokia for pushing Qt programming (QML) else we'd not see the lovely Cascades in our BB10 apps.

You're also forgetting the iOS7 to be announced this week if its a major change that users don't like they will not upgrade to IP6 or IP5.5/5S whatever. Not a lot of IP4S users upgraded. Pricing will matter but I highly doubt a low cast brand new iPhone will be announced this year, much simpler to low price the IP4S and IP5 to ring in more sales (after all its worked the last 3yrs quite well for them).

I sincerely hope Samsung goes with Tizen and drops Android for future products, that will be a HUGE blow to Google, enough to rock them.

SuperionMaximus

Nokia's last Symbian product was the Pureview 808. S40 is not Symbian. The new Asha OS is based on Java like old BBOS. It is the end result of the Smarterphone acquisition by Nokia.

iOS 7 is far more likely to bring renewed interest to the platform then to scare people away. It will likely not be as drastic a change as people are predicting, but more of an evolutionary change to the look of iOS. Think Windows Vista/7 and all ths fancy Aero effects to the desktop in Windows 8 where everything is flat solid colours, but fundamentally still looks the same. My guess is it will be similar to that.

Raymond Torres

Ios 7 has to be bad. And we need more apps and fast. They have to be quick cause this isn't development anymore. Phones out their. Apps will make or break them. I'm a little upset I don't have my wells Fargo app yet.

Posted via CB10

jay64

Hi - I suspect much of this short position was established before the z etc rolled out and are "naked shorts" by large hedge funds (ie: no shares "borrowed" to cover the short position as required). This is reflected in the ftd numbers (fail to deliver) and, as usual, the SEC does not see what it does not want to see or enforce rules that hurt their hedge fund buddies and broker pals at GS etc. As to a short squeeze, sales numbers would need to be substantial and persistent as shorts don't panic on every stock swing. Projected revenues from such sales over consistent periods of time is the only real catalyst that would force shorts to cover. Bumps and dips on rumors, analysts bs or corporate double speak (sales are "higher then expected " - so informative!) are sucker plays for day traders to feed off the average investor like shooting pigs in a barrel. Much of the market now is a fed bubble, as witnessed by the selling panic on the street every time a rumor floats that the fed is thinking of pissing away less of your money.

teddygramz2060

i would like them to come out with bold like the 9790 but refresh for the blackberry 10 that phone was so soild

oakvillerelopro

Fascinating posts by do many. Very inciteful. Thank you all

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Giro_UK

I think BlackBerry Messenger cross platform will boost BlackBerry sales....
A friend of mine left BlackBerry because of other things, not because of messenger. It means those left with BlackBerry can still enjoy Messenger...
BlackBerry need to assist the building of incredible native apps to compete...

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i7up2001

Some also think that competitor could be behind the short interest, as you mention a large short interest tent to look like a company could be in trouble Will they be around in the next 2 years .Helping others to gain in the BYOD and their timeline of introducing new product or OS.... I'm long BB and believe they are on track to revolutionize mobile computing and M2M .

jay64

Would messenger be different then any other messaging app - More secure ? How many people outside corporate use txt messaging for confidential info I wonder and once you go cross platform is security compromised in any way ? I wonder.

Geeoff

Good question. I'd like to know more about this too. I'm really curious to see what it looks like.

robin11

enterprise is about 30% of subs so I expect about 24 million BB10 sales (majority Q10) as quick as they can manufacture and deliver. Consumer BB 10 sales should see 50 million plus over the next two years . I believe most analysts' comments are waaaaay out to lunch on their less than modest forecasts.

robin11

I expect the collapse in consumer subs will roughly equal BB10 sales. A 6-9% decrease would translate to sales of 4.5 to 6.8 million units. Why are short sellers touting the loss of subs when the flip side is that the larger the loss of subs, the better BB10 sales are?

DJjjg

Nice article Chris.

Hphv

The Samsung S4 that I had to set up for my colleague freezes when configuring the 4 th exchange account. Never had that with my Z10!

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tjross

Just pre ordered Q on at att.com, going to keep my Z as backup. BB10 OS is off the chain-- All that's left is the PlayBook update at the trifecta will be complete!

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40blind40

Hi Chris ? I have seen sales estimates from 10 million and as low as 3 million for sales of BB10 phone's.
So my question is if blackberry where on the high side of these estimates for sales, which is way above street estimates, would they have to inform anyone. I mean I've read that if they have a surprise in earnings they would have to give notice to the market.

Superfly_FR

I'm so long, I can wait.
Thx Chris, my thought 99%!

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Alum Uddin

I just cannot understand why Blackberry have not chosen to integrate onto Android. Surely this makes long term astute business sense. The old saying still stands, if can't beat them, join them!

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i7up2001

Alum , you need to do more research.... it's all about security m2m and stability , plus try a BB10 and you will see why it's superior to Android's

FunGuyLover

It was considered. Glad they didn't do it. BB10 can beat them. It makes Android look pretty lame.

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savingblackberry

A small correction:
BBRY has 525 million shares outstanding. Watsa owns 50 million and Lazaridis a little more than 25 million. So the float is 525-50-25 = 450 million. But then you have to also take out shares held by some committed long term shareholders (funds, employees) who are not trading... that number maybe around 100 million so we are probably talking 350 million float and 170 million is short. so thats almost 50%. Someone like Icahn steps in, that combined with some strategic partnership news or some decent earnings, and the short squeeze will be spectacular. My concern is if the shorts are supported by competitors who do not want BB10 mobile computing platform to be a dominant platform. Ny probably that is not the case. If these are pure shorts, they are in for a really massive painful squeeze. I won't be surprised if this squeeze with some positive news and PR can take this stock in the 40-60 range. Only if the company plays a very smart street game with the shorts.

DylanDinh

I switched from the iPhone 5. I love the keyboard, yet many people in my business are using the BlackBerry as well. So it's worthy to give a try. One thing I would love to see is the Cloud service. It took me awhile to sync my contacts and still have bugs in the current software version.

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ltelios

Dylan not sure if you need the cloud for just your contacts, but there is drop box in the app store among others.

Perhaps one of my favorite features in os 10.1 is remote file access via BlackBerry Link if you are not aware of it. You're computer becomes a cloud. You just set up the folders/drives you want your phone to access via link in the settings in link.

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BBZen

Chris U, you forget to include the 10 million shares short in Canada, you are just looking at the NASDAQ numbers. Factor those into the equation and the argument is even more compelling.

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AnotherBillJ

Chris, nobody does as good a job as you at taking complicated stock numbers and making them easy for us all to understand. If I ever need to understand where BlackBerry stands and where it's headed in terms of business, you're there with an easy-to-understand explanation.

Thank you.

oneinfiniteloop

Chris, when you say "massive" can you provide a value for how high it could go? Tesla's squeeze resulted in its value vaulting over 3 times. Blackberry is right now valued at approximately 7.25B. If we were to use the same multiple then that would take Blackberry to over $40 - which is where Prem Watsa thinks Blackberry should be in the near future.

heri16

I am a strong believer of Tesla since 2007. I hope I am also spot on for BlackBerry. We do need an Elon Musk at BlackBerry though.

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stu78

Good article Chris

lorax1284

The easiest way to answer the question of BlackBerry's potential is: how many smartphone users place communications as far-and-away the highest priority as far as their chosen platforms strengths are weighed against one another? What iOS has for me is distractions... what Android has for me is tinkering (like a hobby I pick up once a week and fool around with). What BB10 has for me is my constant companion. It does communication (including Web browsing) better than other devices, and for me, that's of utmost importance.

I think there are 10s of millions of people like me. I also think there are 10s of millions more that are currently using Android and iOS and just haven't figured out yet that what they REALLY want is the best communication platform. Those inclined to switch to BB10 won't figure it out all at the same time in the space of a week... but they will, in ever increasing numbers.

THAT'S why you go LONG on BBRY.

drycube

How can anyone say that they are running a company for success when you say bb10 is releasing on 1-30-2013, only to find out, that it's not an American release date, but an overseas release date. Then, when you finally release in America, you release a device (z10), with virtually no accessories, wtf??? Just as everyone likes to customize their car; they also like to customize their phone. I'm a BlackBerry fan, and will try to ride them out, but honestly, the future doesn't look promising.

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moegrand

My experience over the years is that 'short squeeze' is something that is often hoped for but rarely happens. Most shorts are sophisticated investors or funds that have a way of getting out of the way by covering with options or they stock stays depressed xdue to their continued action.

Just my thoughts.

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BBZen

Tesla, Green Mountain Coffee, Netflix, Herbal Life.... just a few masterful short squeezes this last little while. Been a good year for short squeezes. Blackberry appears to be next.

themapster

I look at Blackberry like Starbucks. When they were closing stores and letting staff go everyone was counting them out bankruptcy was being thrown around. McDonald started to sell gourmet coffee and Wall street discussion was they will never last shares went below 8 bucks. New leader(old one took over) re think, re org and look at Starbucks or Home Depot .
Blackberry offers new Smart computing phone and the people who had a cell phone and a desk top will now feel secure enough to ditch the desk top and combine their phone desktop into one. There is over 3 billion people in the world who now have access to a phone or computer Blackberry should cater to them and not the iCrowd let Samsung and Apple battle it out over who is cuter.

aleksandre

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aleksandre

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freedomx20a

Do you sell at the end of a short squeeze right away?

M65c02

Interesting and a proper forum for discussing rather than cluttering the Z, Q, or VB10 specific forum.

The short interest is rather minuscule and those holding will not be squeezed anytime soon. Remember you penny stock traders BB/RIM has been down 90%. Even aside from other strategies involving various option strategies (touched upon/posted briefly herein) and/or cross industry hedging that may justify shorts even as (viewed alone) are in a loss position, the ave. "shorter" likely remains way ahead. In other words it will take a major, major $$ move to flush a material % out of their BB shorts.

I'm a bit surprised that no one (I believe) mentioned the overall mkt risk. That psunami is coming again, Gents. There is significant systematic, and even systemic, risk to the mkt and especially to a speculative stock as BB became. Alternatively, share prices have enjoyed a run-up based on money rushing into the mkt from a collapsing bond mkt and the now multi-trillion fed spending (or buying of bonds and debt) and, European and U.S. deficit spending. This will/ may/ probably will end in next 18mths. Bottom Line: 35-50% (pick a number) of current share price is riding the wave ?!? Translation: If you can't make money in this mkt(long), you never will.....

Other Observations:

Remember, the market is always right, at least in the long run.

Financials: If BlackBerry disappoints this qtr, the jackels will be in at night. BB knows this and has used every possible means to forestall any bad news. If even remotely poor, however, then we know trouble looms.

Take a hint: This is a major consumer product almost as obvious as the clothes on one's back. Look around, if you see Z's on the street in the U.S., UK, and perhaps Europe, thats a good sign. If you don't see them at every turn in Canada, then deep trouble. Again, numbers can be played with a qtr or two (or three), but the reality is in having 30,40,50mm net Z/Q users at the end of 2013.

Samsung is bringing its rendition of BES this fall, the next Samsung phone is out as is the new Iphone and Msft knows it must dig in and make its mark. All of these cos. (along with Google) also have a foundation for a future (the World of 2015?!) comprehensive, integrated ecosystem which will be hard for BB to negotiate or match.

If there's going to be inert growth by BB, it must start by quickly cleaning up BB10. Otherwise, long term growth and its return to glory is simply a pipe dream.

[Informational Note to another Post: The micro-computer later named the IBM PC was developed by a Data General OEM. And, give credit to the Apple II and III, as well as LISA...each a forerunner to the MAC,,,and a brutal time of descension within Apple.]

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SapphireEcstasy

I think all BlackBerry should do to insure themselves in this battle is to bring BBM immediately to Android and iOS. That would give everyone a chance to see how great their number one app is!

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abstract_ca

Chris;
Great article...very balanced very real. Your header tags don't spew negativity, doom and gloom for an enterprise that has pieced itself together. Thanks for that.
It should be noted since this article has been posted some events have occurred.
WWDC - Flop, IOS7 not as what was expected, flattened UI. Few security advancements.
US/NSA having a little credibility issue with personal data collections and privacy, the BB10 allows security profiles to be implemented and rolled out at a very granular level.
Google / Android has not proven its secured platform can handle the global public and private security concerns we now face.