Strong Liquidity
BlackBerry currently has a strong liquidity position, which is key to any turnaround. In the past it has had to cut capex, outsource certain manufacturing capabilities, and effectively manage working capital in order to stay afloat. The company now has cash and equivalents of $2.4 billion. Its $940 million arbitration award from Qualcomm (QCOM) has been a boon to the company. This provides BlackBerry much-needed breathing room for CEO John Chen to continue to execute his vision.
BlackBerry is also suing Facebook (FB) for allegedly infringing on BlackBerry messaging app patents:
BlackBerry Limited, the Canadian enterprise software company that used to sell smartphones, filed a lawsuit today against Facebook, alleging that the social network and its WhatsApp and Instagram subsidiaries infringe on BlackBerry messaging app patents. The core of BlackBerry’s complaint, which is a , is that the company’s proprietary and patent-protected messaging product BlackBerry Messenger, known colloquially as BBM, was a cornerstone of modern mobile communications.
BlackBerry is now contending that its intellectual property has been infringed upon by Facebook’s “using a number of the innovative security, user interface, and functionality enhancing features that made BlackBerry’s products such a critical and commercial success in the first place.”
BlackBerry has helped innovate the smartphone and messaging apps as we know them. As the BlackBerry smartphone lost market share to Apple and Samsung (OTC:SSNLF) the use of BlackBerry messenger also faded. I previously looked askance on BlackBerry’s legal claims against Qualcomm, but BlackBerry won out. The company has a prodigious patent portfolio. If it wins a legal settlement against Facebook then it could possibly improve BlackBerry’s liquidity even further.
Conclusion
BB is up over 70% Y/Y. I expect headwinds on the top line and more operating losses this year. However, the company has enough liquidity to sustain itself for the foreseeable future. Its liquidity could give John Chen enough time to make another game-changing acquisition or find the next growth market. I rate the stock a hold into earnings.
