1 Huge Reason You Shouldn't Count BlackBerry Out

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As more employees bring their own devices to work, employers increasingly need efficient ways to keep all those gadgets secure. To that end, BlackBerry (NASDAQ: BBRY  )  has announced its Secure Work Space solution for Apple iOS and Google Android, which separates work apps and data from the employee's personal apps and data in a streamlined manner. Thanks to the multiplatform support, BlackBerry has created a potentially massive opportunity to monetize non-BlackBerry devices.

According to Forrester Research, 200 million employees will bring their own devices to the workplace by 2016. Assuming that's an accurate measure, BlackBerry's addressable market could potentially be as large as 190 million devices, based on its coverage of 95% of smartphones shipped in the first quarter. At $99 per year per device, I wasn't kidding when I said this could be game changing for BlackBerry's business.

Getting real with it
It's unrealistic to say that Secure Work Space will capture 100% of its potential addressable market, generate more than $18.8 billion in service revenue, and that makes the stock a screaming buy today. Based on a potential total addressable market of 190 million devices, here's a more realistic look at how Secure Work Space could be accretive to earnings in 2016:

2016 Secure Work Space Capture Rate

Subscribers (millions)

Projected EPS Boost ($99 per device)

Projected EPS Boost ($50 per device)





























Source: Author's calculations and BlackBerry. EPS = earnings per share. Projected EPS based on 524.16 million BlackBerry common shares outstanding as of June 24, 2013.

To arrive at projected EPS, I took BlackBerry's full-year 2012 service and software segment's gross profit margin of 86% and applied the same percentage to Secure Work Space's annual projected revenue. With analyst consensus expecting BlackBerry to lose $0.85 cents a share in 2015, it wouldn't be out the question for Secure Work Space's revenue to offset some or all of those losses.

Great positioning
According to Gartner, the enterprise mobile device management industry is undergoing a shift toward "container"-based solutions thanks to bring-your-own-device policies. Luckily, BlackBerry's Secure Work Space solution puts a secure "container" around any sensitive information stored on a device, putting it in an excellent position to benefit. As you can imagine, BlackBerry isn't the only game in town. In fact, there are more than 128 mobile device management vendors, all of which are likely vying to create container-based solutions. Where BlackBerry can stand out from the crowd is with its rock-solid security reputation and its familiarity among IT administrators. If push came to shove, BlackBerry could lower prices to remain competitive and it would likely still benefit the bottom line, assuming BlackBerry's 2012 software and service gross profit margin could be maintained.

Low-hanging fruit?
As exciting as it is for BlackBerry to have a chance to drive subscriber growth from outside its ecosystem, investors shouldn't forget about the company's less-than-stellar smartphone turnaround efforts. Last quarter, only 40% of devices that shipped were of the freshly minted BlackBerry 10 variety, indicating that the company's turnaround efforts haven't thus far been well received. Additionally, the company is bleeding subscribers, which generate profitable revenue streams over their lifetime, putting a greater sense of urgency on the company to improve the outlook and not tap into its $3.1 billion of cash.

Arguably, with expectations solidly planted in the basement, BlackBerry doesn't have to hit a massive home run with Secure Work Space for the stock to be a home-run investment at these levels. A few signs of life could turn things around in a hurry.

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Read/Post Comments (8) | Recommend This Article (3)

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 July 23, 2013, at 8:51 PM, HelpIsHere wrote:

    Well done, you get it.

  • Report this Comment On July 23, 2013, at 10:09 PM, TimmyBee123 wrote:

    To say their new phones have not been well received is silly. How long have the Q10s been on sale in the US?

    The Z10 is doing well in many jurisdictions where it is getting carrier support.

    Looks like BlackBerry will be getting more carrier support in the US for the Q10.

    Be patient, the full line of phones has not even been rolled out yet and they are close to breaking even.

  • Report this Comment On July 23, 2013, at 10:10 PM, TimmyBee123 wrote:

    What are subscribers? How do I, a Z10 owner, become a subscriber?

  • Report this Comment On July 24, 2013, at 12:01 AM, OracleofOmahaha wrote:

    There will always be those believers who will blindly follow bbry all the way down to the bitter end and are incapable of accepting any negative forecasts for the company. The fact remains bbry is still losing what little market share they have. People are just not switching from their Android or iPhone to bbry when there is no reason to do so. All you have left are the small core of bbry users who will never switch regardless of what new and better technology is available. This is not enough to sustain the company long term even if bbry supporters refuse to believe it.

  • Report this Comment On July 24, 2013, at 1:39 AM, goog2013 wrote:

    BES, enterprise support?

    The writer had no idea what he was talking about.

  • Report this Comment On July 24, 2013, at 7:42 AM, johnmarkussen wrote:

    i am stil using my old bold wich actually works great,i am not going to change just for the sake of changing

  • Report this Comment On July 24, 2013, at 12:24 PM, greenember wrote:

    I agree that BlackBerry's consumer prospects look bleak. However, I would say it's too early to call BB10 a flop. The Q10 wasn't even on sale in the US during the last quarter much like the Z10 the quarter before. Also, with everyone in agreement that BlackBerry pretty much only appeals to corporate users right now, we definitely can't rule them out. How many corporations are going to buy devices on day 1 and do massive roll-outs to users without thoroughly testing the devices first? Once tested, approved, quoted, purchased, etc... it may be 6 or more months gone by. BlackBerry has 2 more quarters or so before you can write a eulogy. If sales haven't picked up by then, then I'll concede the point. Analysts are starting to talk positively about Windows Phone but forget it has been on the market for several years now and is just finally gaining traction. These things take time.

  • Report this Comment On July 24, 2013, at 4:34 PM, melegross wrote:

    This is nonsense. Blackberry's service offers little for Android or iOS phones and tablets. In addition, there are many MDM's out there which already offer a better service than Blackberry is offering. And there is no telling whether Apple, which is aggressively courting business and government, won't offer even more on the security front. Every year they increase their security offerings.

    Whatever Blackberry is offering here, and writers on this subject aren't impressed by Blackberry's third party support for Android and iOS, there is no reason the believe that it will even be of interest to managers.

    Thinking that this will somehow save Blackberry is pie in the sky thinking.

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9/27/2016 11:31 AM
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