Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
So what: BlackBerry's mobile security suite will now be offered as an optional addition to Samsung's Galaxy line of smartphones and tablets for an undisclosed price -- the exact terms of BlackBerry's deal have not yet been disclosed. The software, called BES12, will integrate with Samsung's existing KNOX security system that runs atop Google's (NASDAQ: GOOG) (NASDAQ: GOOGL) Android operating system. BlackBerry also claimed BES12 will be available on "all of the major enterprise mobile platforms," implying strongly that users with phones running Apple's (NASDAQ: AAPL) iOS or Microsoft (NASDAQ: MSFT) Windows Phone operating systems will also be able to make use of its security suite.
BES12 can operate cross-platform, and BlackBerry said it "simplifies the task of mobilizing an organization by providing a single command and control center for managing the availability and usage of devices, apps, activities and mission-critical data."
Now what: BlackBerry has historically been considered the best enterprise phone maker, but that advantage has vanished in recent years as most companies allowed their employees to use Android or iOS phones. This move is a bid to restore the company's relevance in the enterprise space. However, beyond the headline Samsung partnership, BlackBerry didn't exactly inspire confidence by name-dropping "Home Hardware and American Crane" in its press release as the largest organizations to adopt BES so far.
Investors have jumped at any opportunity to bid up BlackBerry's shares, which have risen 90% over the past year even while the company's revenue has been cut in half. BlackBerry sported a P/E of 20 a bit more than five years ago; to get back there now at its current share price it would need to earn $320 million in profit. That would be quite possible at the 12.5% net margin BlackBerry sported five years ago (it would only need $2.6 billion in revenue to reach that much profit in this scenario), but investors might be too optimistic about the company's ability to get there with software sales.
In BlackBerry's latest quarter, it reported a 6% year-over-year decline in software revenue (to just $59 million), and it only expects to earn $250 million from software sales for the full fiscal year, which would be 21% less than what it earned from software sales two years ago. This is a stock for speculators, not dedicated long-term investors. BlackBerry's story hasn't changed.