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As BlackBerry mulls going private, analysis sees smaller company being public & profitable

post #1 of 14
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Executives at BlackBerry are reportedly considering taking their struggling company private, but a new analysis suggests the company could stay public ??if management were to accept the fact that it is now a smaller smartphone company.

BlackBerry


Over the last four quarters, the share of BlackBerry's share of revenue spent on selling, general and administrative expenses, as well as research and development, has greatly exceeded rivals like Nokia and Apple. Those high operating expenses suggest to Maynard Um of Wells Fargo that BlackBerry could succeed ? and do so as a public company ? if its executives could embrace "the reality of being a smaller company."

"We continue to believe that BlackBerry has a small but loyal following and that it could reduce spending to focus on core target markets," Um said in a note to investors on Friday.

In the last year, 18.8 percent of BlackBerry's revenue has been spent on SG&A, a sum much larger than Nokia's 13.2 percent. Apple has much greater scale than those two companies, but for comparison's sake, 6.3 percent of the iPhone maker's revenue was spent on SG&A.

As for R&D, it took 12.9 percent of BlackBerry's revenue over the last year, compared to 11.3 percent of Nokia's devices business, and 2.5 percent of Apple's revenue.Maynard Um of Wells Fargo believes BlackBerry could become profitable once again if it were to cut spending and focus on "core target markets."

Um's take was given in response to a report from Reuters on Friday, which indicated that BlackBerry officials are "warming up to the possibility of going private." The company is said to be considering the idea, but doesn't have a deal imminent or any plans in place.

But BlackBerry executives and board members are said to believe that taking the company private "would give them breathing room to fix its problems out of the public eye," the report said.

In its last quarterly earnings report in June, BlackBerry posted a loss of $84 million on shipments of just 2.7 million devices running its new BlackBerry 10 platform. The company shipped a total of 6.8 million smartphones, but most of those were legacy devices.

Um said he wouldn't be surprised if BlackBerry does in fact go private or is acquired by another company. But if the Canadian smartphone maker is to succeed, he believes it needs to be "disciplined and quick" in adjusting its cost structure to that of a company with smaller revenue.

Regardless, Um has maintained Wells Fargo's "market perform" rating for BBRY stock, as he's not convinced that BlackBerry management will be able to guide the company out of its downward spiral.

"Any sense of urgency is difficult to determine, given management has not been very visible or vocal with a clear strategy," he said.
post #2 of 14
Bit strange comparison, but ok, the article mentions it.

Well, what can you do. You get taken over by another company that wasn't even in the cellphone market. Never saw it coming, that's understandable. But why oh why did they take so long to fight back? They might have ad a chance if the response was quick enough. Now it's all too little, too late. Oh well.
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post #3 of 14
Stopped reading after I saw Maynard Um's name.

AppleInsider continues to provide the open mic and uncritical 'ink' for every yutz analyst in town.

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GOA

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Proud AAPL stock owner.

 

GOA

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post #4 of 14

How is cutting their R&D spending going to do anything but make themselves worse off in the long run for a short-term gain? Typical short-sighted thinking for some idiot who can't see beyond the current quarter's bottom line.

post #5 of 14
Quote:
Originally Posted by AppleInsider View Post

Executives at BlackBerry are reportedly considering taking their struggling company private, but a new analysis suggests the company could stay public ??if management were to accept the fact that it is now a smaller smartphone company.

Over the last four quarters, the share of BlackBerry's share of revenue spent on selling, general and administrative expenses, as well as research and development, has greatly exceeded rivals like Nokia and Apple. Those high operating expenses suggest to Maynard Um of Wells Fargo that BlackBerry could succeed ? and do so as a public company ? if its executives could embrace "the reality of being a smaller company."

This article ? seems to pose ? a lot of questions ??
(they should just rename the company Hu??ler Tech) /s

"Apple should pull the plug on the iPhone."

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"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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post #6 of 14
Going private *is* admitting things are going to be smaller isn't it? The only reason to be public is to get access to the extra capital to expand, apart from that it's a pain in the bum.
post #7 of 14
Taking the company private is the only way BBBY can survive.
post #8 of 14
I don't see how going private is going to solve blackberry's biggest problems. Between iOS and Android sucking all the oxygen out of the mobile market, and Microsoft angling for a distant third place, I'm not sure there is desire for a fourth major OS platform. If Android starts to splinter, there will be bottom feeders based on Android competing for the oddballs left. Blackberry's success will depend heavily on finding those unrealized "use cases" that iOS and Android have some somehow missed, and bringing solutions to market for those. Messaging isn't enough any more. Even more troublesome is the lack of product differentiation between, say, the z10 and an iPhone or HTC. There are some cool tricks and features in their UI, but that's not enough to make people pick a distant minority platform.

Also not sure what a private could do that a public company could not. Apple came back from the brink of bankruptcy while being a sprawling mass of demotivated people, pork projects (so long Newton!), and defocused products. Blackberry is pretty lean compared to that.

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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"Apple should pull the plug on the iPhone."

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post #9 of 14

All I'm going to say is that it's "Journalism 101" (I actually learned this in grade school and it's also in every standard writing style guide ever), that the first time you use an acronym like "SG&A" that you define what it is first.

 

Like ... "SG&A, (Sugar, Grapes and Anteaters Incorporated)"...

 

Then when you say "SG&A" afterwards, it actually makes some kind of sense. 

post #10 of 14
Quote:
Originally Posted by Gazoobee View Post

All I'm going to say is that it's "Journalism 101" (I actually learned this in grade school and it's also in every standard writing style guide ever), that the first time you use an acronym like "SG&A" that you define what it is first.

 

Like ... "SG&A, (Sugar, Grapes and Anteaters Incorporated)"...

 

Then when you say "SG&A" afterwards, it actually makes some kind of sense. 

 

Great point, and a recurring problem in the tech media.

 

Except that "SG&A" isn't an acronym, because you can't speak it as a word.  It's merely a perplexing abbreviation.

post #11 of 14
All I'm going to say is that it's "Journalism 101" (I actually learned this in grade school and it's also in every standard writing style guide ever), that the first time you use an acronym like "SG&A" that you define what it is first.

Like ... "SG&A, (Sugar, Grapes and Anteaters Incorporated)"...

Then when you say "SG&A" afterwards, it actually makes some kind of sense.

It made it clear from the beginning:
selling, general and administrative expenses
post #12 of 14
I see a trend here. Companies that are totally screwed by Apple want to go private. Ok, explain how that helps? At this rate we can expect to see Gates and Ballmer wanting to take Microshit private in a few years.
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Been using Apple since Apple ][ - Long on AAPL so biased
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post #13 of 14
Quote:
Originally Posted by digitalclips View Post

I see a trend here. Companies that are totally screwed by Apple want to go private. Ok, explain how that helps? At this rate we can expect to see Gates and Ballmer wanting to take Microshit private in a few years.

 

A few more years of Uncle Fester at the helm of MS and it may be small enough to take private. 

 

I remember MS in the '80s when they could do just about anything they wanted to do. Far cry from today when they can't even do what they want to do.

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #14 of 14
Quote:
Originally Posted by Gusy32 View Post

It made it clear from the beginning:
selling, general and administrative expenses

 

No it isn't.  The abbreviation needs to be given parenthetically, immediately after the first usage of the term, as Gazoobee wrote.  Not as a surprise, two paragraphs later.  It's standard English.


Edited by TeaEarleGreyHot - 8/10/13 at 3:21pm
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