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BlackBerry Needs More Than an Upgrade

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What's in a name? Apparently, a 15% increase in market cap. That's what RIM, oops, I mean BlackBerry (NASDAQ: BBRY  ) shareholders enjoyed on Monday. After initially dropping about 13% after its momentous BB10 announcement on Jan. 30, BlackBerry came roaring back. The last two days have more than made up for the initial jitters about the cost of its new phone, particularly in emerging markets, and a delayed release of its new Z10 phone here in the U.S.

Since I've gone on record, on more than one occasion, as a BlackBerry supporter following several of CEO Thorsten Heins' recent moves, you'd think the jump in stock price would make me ecstatic. Unfortunately, the impressive jump in BlackBerry's share price raises a question. After peeling away the outer layers, is there really anything tangible behind this run-up?

What got the ball rolling
Not releasing the new Z10 smartphone in the U.S. -- something I think it's safe to say we all pretty much expected -- put a damper on Heins' announcement Jan. 30. Though overly emphasized, the domestic market for smartphones is seen by many as the ultimate test of a smartphone company's success. As BlackBerry competitor Nokia (NYSE: NOK  ) can attest, however, there are a lot more smartphone users out there than us, but perceptions are what they are.

As I outlined in a recent article, leading up to the last couple days' jump, the company formerly known as Research In Motion had more going for it than scuttlebutt and praise from industry insiders. Feedback from the 1,600 or so companies and 100 governmental agencies beta testing BlackBerry's BB10 OS was positive, almost across the board. Talk of BlackBerry making its secure email alternative available for Apple (NASDAQ: AAPL  ) iPhones and its 51% domestic smartphone market share and Google's (NASDAQ: GOOGL  ) globally dominant Android OS users provides insight into what is becoming a new and improved smartphone manufacturer.

BlackBerry is finally coming to the realization that in the world of mobile computing, very few can truly go it alone. Like Nokia, who unabashedly tied its future to Microsoft and its Windows 8 OS, BlackBerry now seems willing to change, to explore alternatives that were shut down under prior leadership. Other than perhaps Apple with its dominant position in the smartphone marketplace, at least domestically, going it alone simply isn't an option. Heck, even Google partnered with LG to manufacture its successful Nexus phones and it owns Motorola Mobility.

BlackBerry's new merchant payment solution, Secure Element Manager, is another arrow in Heins' quiver and provides an additional opportunity for revenue utilizing BB10. Add to all this BlackBerry's successful "port-a-thons" and the thousands of independently produced apps from developers around the world, and there was substance behind its stellar stock price run-up.

And now?
For all the reasons above, I was fully on board with BlackBerry's recent surge leading up to Jan. 30, for the simple reason that Heins has provided more than speculation and wishful thinking to shareholders. There's a method to BlackBerry's madness. And then comes Monday's 15% pop, followed by today's 5% jump at the open. What's wrong with that, you ask? The 20% increase in share price in the past two days is widely seen as a response to an analyst upgrade, along with rumors coming out of the U.K., which is one of the few markets you'll find the Z10. Apparently, BlackBerry's new phone is selling well across the pond. An analyst upgrade and sales results rumors , after only a week, driving a 20% pop in share price?

BlackBerry was the recipient of a Sanford C. Bernstein upgrade, from market perform to outperform, and an increase in target price from $12 to $22 a share. Great news, and not necessarily surprising --  other than why the initial target price was so low to begin with -- for those of us who've followed along as Heins gave us more and more to hold onto the past month.

The Jefferies analyst who has suggested sales of the Z10 are strong in the U.K. won't give a number, but did say pre-order figures were "solid," whatever that means. The fact that early indications are good for the new BlackBerry phone is also a positive, but a 20% increase in value positive is over the top.

A huge jump in share price, based on a rating change and rumors? If you're on the sidelines, wondering whether or not BlackBerry warrants your consideration, for heaven's sake, don't make a decision based on the last two days. BlackBerry is worth a look if, and only if, you buy into what Heins is selling -- and there's a lot to like, make no mistake. But an analyst upgrade and hearsay aren't reasons to invest your hard-earned money.


Read/Post Comments (8) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 05, 2013, at 9:27 PM, ltortora7 wrote:

    It's called buy on the rumor / speculation and sell on the news. Happens all the time. The reality set in when people realized how complex the device is and won't even save their remaining BB base of loyal customers. Those loyal customers have muscle memory in their thumbs and used to BB 5 and maybe 6. This new OS will make them look at iOS or Android for sure.

  • Report this Comment On February 05, 2013, at 9:28 PM, ltortora7 wrote:

    oh and no iOS or Android user is going to abandon their loved ECOSYSTEM for this. guranteeeed.

  • Report this Comment On February 05, 2013, at 9:40 PM, CZZZZZZ wrote:

    re: oh and no iOS or Android user is going to abandon their loved ECOSYSTEM for this. guranteeeed.

    Initial research shows more than 50% of BB10 buyers are Android and iPhone users, this confirms a lot of suspicions about Android and iOS being past their there's a viable alternative to the dualopoly

  • Report this Comment On February 05, 2013, at 9:52 PM, ltortora7 wrote:

    Ok so if that holds true when BB10 devices are available worldwide which they are not yet, their expected (fingers crossed) 5,000,000 phones sold worldwide in a quarter are 1/4 ios and 1/4 android we talking about taking a stab at .005% of IOS market share and even less Android? Good luck with that!

  • Report this Comment On February 05, 2013, at 9:54 PM, ltortora7 wrote:

    Apps and eco system are going to dominate the smart device market share. BB and Microsoft are the bottom of the barrel and are fighting for #3 spot which really is a spot for the first looser.

  • Report this Comment On February 05, 2013, at 11:38 PM, TimKnows wrote:

    Apple has suffered a terminal bLow with the introduction of the Z10 by BlackBerry. There is money to be made investing in Apple from the short side. Good luck.

  • Report this Comment On February 06, 2013, at 5:54 AM, AlbertJames wrote:

    Blackberry stock was way oversold even at $17 it is still oversold. BTW The Z10 is a awesome smartphone and Heins is doing a great job. I think Blackberry's future is looking promising.

  • Report this Comment On February 06, 2013, at 9:54 AM, daveraj wrote:

    InfoThatHelp = Itortora7 everyone.

    Haters gonna hate.

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