Why Partnering With Amazon Could Keep BlackBerry's Momentum Going

You may think it's hard to believe, but BlackBerry's software and services have the potential to pave the way for a profitable future.

Jun 24, 2014 at 9:00PM

Now that BlackBerry Limited (NASDAQ:BBRY) is fresh off a first-quarter earnings report which surprised nearly everyone, and showed that the company still has some life left, investors are likely wondering what's next. The company made measurable progress across its business, even in hardware, and will need to keep the momentum going to continue its turnaround.

Fortunately, the company has several promising developments in the pipeline, particularly when it comes to software and services. This will help it keep progressing going forward. One example is a new partnership with Amazon.com (NASDAQ:AMZN). This is very important to BlackBerry, since software and services represent the bulk of its business now. The new BlackBerry will likely be known much more for software and services than hardware, and the partnership with Amazon is a big step in that direction.

While it might be hard to believe, here's why you may actually have reason to be optimistic about BlackBerry's future.

Several initiatives showing progress
BlackBerry's quarter, while unspectacular on the surface, was an important indication that perhaps the floor is in. The company managed to stem the steep declines on the top and bottom lines that worried analysts and investors that the company was in real danger.

In all, revenue dipped just 1%, and BlackBerry turned a $23 million net profit thanks to significant cost cuts. BlackBerry reduced quarterly operating expenses by 57%, which boosted gross margin by five percentage points.

Other than cost cuts, BlackBerry did show progress in several key strategic initiatives. This was true even in hardware. BlackBerry recognized hardware revenue on approximately 1.6 million smartphones, which was 300,000 more than it recognized in the previous quarter.

Services are where BlackBerry really shined, and that area represents the best avenue for future growth since services make up more than half the company's total revenue. Combined with software, these two areas are where BlackBerry needs to keep focus.

A very exciting development is the budding partnership with Amazon that BlackBerry recently announced. Coming this fall, BlackBerry will partner with Amazon for mobile apps on BlackBerry 10.3, which will add more than 240,000 Android apps to the platform. The Amazon Appstore will be pre-loaded with the BlackBerry 10.3 operating system. This will go a long way in building a competitive application ecosystem for BlackBerry.

Last but not least, BlackBerry launched its mobile payment system BBM Money in Indonesia. BlackBerry is making a big push into the emerging markets, which represent a significant opportunity for growth. Separately, BlackBerry successfully launched the new Z3 device in Indonesia last quarter, with launches in 8 additional nations to come.

Balance sheet to remain strong
BlackBerry's balance sheet strengthened last quarter as well, which provides an important margin of safety. The company's cash balance increased by $429 million quarter over quarter, and now stands at $3.1 billion. However, it's worth noting that much of the increase was due to non-operational factors. BlackBerry received a tax refund of $397 and proceeds from real estate sales of $287 million. Focusing on its core operations reveals that BlackBerry actually burned through $255 million in cash.

Even so, BlackBerry's cash burn decreased by over two-thirds from the prior quarter. And, management doesn't foresee the company burning through too much more cash the rest of the year. Chief Financial Officer James Yersh stated in the conference call he doesn't expect BlackBerry's cash balance to drop below $2.5 billion this year, so the balance sheet should remain strong.

Don't write off BlackBerry
It might seem foolish (small 'f') to say it, but BlackBerry might have some life left. It's making an important shift in focus that could pave the way for a profitable future. There isn't much chance for BlackBerry to make a comeback in hardware, since it's likely a losing battle, at least as far as the United States is concerned.

But that doesn't mean BlackBerry is hopeless. The company still has an opportunity to become popular in hardware overseas. And, perhaps more importantly, the company is still a viable player in software and services. This is especially true now that BlackBerry has announced an exciting partnership with Amazon that will bring hundreds of thousands of new applications to BlackBerry's updated operating system. If the partnership gains traction, BlackBerry might just have a real future.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Bob Ciura has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers