One of the problems with trying to put a valuation on BlackBerry (NASDAQ: BBRY ) has always been that BlackBerry is not exactly a pure-play devices company like Apple or Samsung, but rather a devices and mobile device management, or MDM, software company. Simply put, there are no pure-play MDM companies trading in the U.S., so it's difficult to get a feel for the valuation of the sector and BlackBerry itself.
Two major MDM players are about to be listed soon
However, this void of public MDM companies is coming to an end soon. Recently, two of the biggest independent MDM companies have filed for IPOs, and soon investors will have something to compare BlackBerry to.
MDM software firm MobileIron has filed to sell about 11.1 million new shares at a midpoint offering range of about $9 per share, according to the company's recent S1 filling. If successful, the company will raise about $100 million, giving it a market cap of about $670 million.
MobileIron reported revenue of $13.8 million in 2011, $41.1 million in 2013, and $105.6 million in 2013, and reported net losses of $25.7 million, $46.5 million, and $32.5 million, respectively. As for the first quarter of 2014, things are not looking that good.
Growth has stalled compared to the same period a year ago. The company reported total revenue of $28.2 million in the first quarter of 2014 compared to $25.8 million in the first quarter of 2013, or a 9.3% increase in total revenue. At the same time, it reported a net loss of $14 million. At these levels, the run-loss rate is much higher than 2013.
Another MDM company coming to market is Good Technology. According to the company's S1 filling, Good had revenue of $85 million in 2011, $116 million in 2012, and $160 million in 2013. It lost $41 million in 2011, $90 million in 2012, and a record $118 million in 2013. As for the first quarter of 2014, the company reported revenue of $46 million and a net loss of $24 million. The company aims to raise a maximum of $100 million, but we can not as of yet calculate a market cap, because we have no intelligence as to the number of shares offered and at what price.
Lets play the comparative valuation game
In the case of MobileIron, the $670 estimated market cap gives the company a price-to-sales ratio of about 6.5 times trailing sales. Now let's put that in perspective against BlackBerry.
BlackBerry's fourth quarter 2014 revenue was $976 million, of which 63% was generated by services and software sales, and the other 37% was hardware sales. That puts services and software at approximately $614 million.
Assuming BlackBerry stabilizes and replicates these numbers over the next three quarters, it will probably generate $2.4 billion in service and software sales for the full year. If we leave BlackBerry's hardware division aside, assuming it doesn't exist or it is worth zero, and we value BlackBerry's service and software revenue at 6.5 times sales -- as the MobileIron IPO is being priced -- then BlackBerry could be worth around $15 billion.
That's about four times higher than where it is trading today.
What this might mean for BlackBerry
Granted BlackBerry has problems, but it is not losing anywhere near the money the two soon-to-be-public companies are losing, and BlackBerry is still the leader in this space. If the market prices MobileIron at 6.5 times sales, then this might give BlackBerry's stock a boost, because currently BlackBerry trades at just more than 1 times forward sales and 0.58 times trailing sales.
The bottom line
While no one knows if the two IPOs mentioned above will perform well or not once shares hit the market, one can't help but notice that MobileIron is priced at 6.5 times sales, when BlackBerry currently trades slightly above one time forward sales.
So unless these IPOs tank after their shares start trading, on an apples-to-apples relative comparison, these two IPOs will probably make BlackBerry look cheap.
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