Lies BlackBerry Investors Like to Tell

NEW YORK (TheStreet) -- We've all heard the saying: "The more things change, the more they remain the same." That seems to be the prevailing pattern for BlackBerry (BBRY). But its investors insist, "Things will be different this time." They won't.

As with the past two years, BlackBerry stock began 2014 with plenty of promise. Shares were up at one point by 46%, reaching an intra-day high of $10.90 on Feb. 25. Since then, the stock has dropped 25% to Tuesday's close of $8.10. Investors maintain, "This is another feel-good story." They've latched their faith to new CEO John Chen, who is working diligently to reinvent the company. But what's the game plan?

As much credit as Chen deserves for his enthusiasm to turn this ship around, investors said the same thing about ousted CEO Thorsten Heins. They also said this about the regime before that. Nothing has changed. And there's no data to suggest that this company is any closer to getting back to a fraction of what it once were, much less be a threat to Apple (AAPL).

BlackBerry bulls will disagree. But the fourth quarter is in the books and the beleaguered smartphone maker reported yet another $423 million loss from a year-earlier profit of $98 million. This brings BlackBerry's fiscal year total loss to a whopping $5.9 billion.

This company continues to burn through cash like it's trying to burn evidence. In a way, it seems deliberate. With as much support as BlackBerry receives from its faithful followers, where's all the cash going? The stock saw an initial 6% spike when the results were released, then cooler heads prevailed. Shares ended down 7% after the full report was digested.

The company posted an adjusted per-share loss from continuing operations of 42 million, or 8 cents a share. Revenue slid 64% to $976 million. BlackBerry said it sold 3.4 million smartphones in the period, including about 2.3 million BlackBerry 7 models. Are investors paying attention?

This means close to 70% of handsets sold were BlackBerry 7 model phones. These are the older phones, not the newer BlackBerry 10 models. This would be akin to Apple selling more iPhone 4 models than the newer iPhone 5S. If that is not an indictment of BlackBerry's failed designs and/or marketing, I don't know what is. Yet investors insist that, "BB10 devices are better than iPhones."


Management is starting to pay attention. BlackBerry recently updated its software to include additional features for Apple, Microsoft (MSFT) and Google's (GOOG) Android phones. Chen says he will focus the company on growing its BBM chat software, which I think is a great move, albeit not a surprise.

Several weeks ago, on the heels of Facebook's (FB) $19 billion deal for WhatsApp, Chen told CNBC that he would accept $19 billion for BlackBerry's BBM messaging service. BlackBerry's total market cap currently stands at just $4.26 billion. Facebook's deal suggests that messaging is the new trend. And if Chen can create value for BBM, he would build up the profile for the entire company.

The problem, however, is that the number of BlackBerry users continue to decline. Investors insist, "That's not an issue." But based on BlackBerry's dwindling handset sales, iPhones and Android devices are what users want. Essentially, even if Chen was successful that building up BBM, there is no guarantee that BBM would be differentiated enough to drive users away from existing messaging platforms.

I don't have a crystal ball. With $2.7 billion cash on the books, Chen has some flexibility to operate with a trial-and-error mentality. But seeing how fast this company burns through cash, investors insisting that "glory will return" have to wonder how much time is left. On Wall Street, fallen empires seldom get a second chance to rebuild. The only truth here is that BlackBerry is giving it a good try.

At the time of publication, the author was long AAPL and held no position in any of the other stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

More from How-to

Here's How Much Every 2018 World Cup Manager Will Make

Here's How Much Every 2018 World Cup Manager Will Make

How Much Do Real Estate Agents Make?

How Much Do Real Estate Agents Make?

How to Read a Cash Flow Statement

How to Read a Cash Flow Statement

Jumbo Mortgage Limits in the 10 Largest U.S Counties

Jumbo Mortgage Limits in the 10 Largest U.S Counties

How to Get Your First Homebuyer Loan

How to Get Your First Homebuyer Loan