BlackBerry – Earnings Release on Friday.

What to make of BlackBerry?

Something is wrong here.  Something has been wrong with this company for a longtime.  Will Friday bring good news or bad for the former Canadian iconic company?

What does Model Price say?

Let’s start with our model price chart.

BlackBerry Inc. with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

BlackBerry Inc. with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

For those interested, a daily updated chart of BB subsequent to this post will be maintained on Facebook, here.

As you can observe BlackBerry trades under our last line or EBV-3.  What does this mean?  The equity markets, through the stock price, has no connection to the balance sheet of the company.  After all the write off of assets – inventory, goodwill and other soft unmarketable assets – over the last few years I’m thinking the asset side of BlackBerry’s balance sheet should be dependable and stated asset values close to fair market value or better still liquidation value.  Unfortunately the equity market markets are having none of this.

Enter John Chen, BlackBerry’s New CEO and Executive Chairman

This will be his first quarterly report since his hiring on November 4th.  Yes, it may be too soon for Mr. Chen to offer up any definitive corporate strategies or provide a future roadmap on the direction of the company.

But he could do one thing.

Somehow if Mr. Chen can, either through strategic actions or verbal assurances, give the equity market, confidence in the balance sheet of BlackBerry this will allow the share price to reconnect with the balance sheet of the company.

How will we know whether this reconnecting has occurred?

Simple, when the shares of BlackBerry has a positive transit of EBV-3 or $10.27 CDN.  (This calculation is based on the company’s second quarter August balance sheet.  We will endeavor, as always, to input the latest balance sheet on the company’s earnings to calculate a new EBV-3 for the end of November on the day of the announcement.)

In my opinion, if Mr. Chen succeeds in this one area – having the equity market through the share price of the company reestablish a connection to the balance sheet of BlackBerry – he will be worth every cent the company is paying him in compensation.  If BlackBerry has any future at all, a proverbial homerun at this point in time of the company’s history, the company must first reach first base – obviously.  First base being the market believing in the stated values on BlackBerry’s balance sheet.

So we will see.   This quarterly earnings report should be interesting.  I personally can’t wait to see Mr. Chen’s balance sheet and the market reaction to it.  Will Mr. Chen have a big write-off of stated assets that former managements and board members refused to deal with?  Confirming what the equity markets have been saying.  Will he give assurances of BlackBerry’s profitability sometime in 2014?  How will he sound on the conference call giving dispirited stakeholders reasons to cheer for 2014 and beyond?

Who knows, but our sharp pencils and computers are waiting.

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