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Why You Shouldn’t Count Research In Motion Ltd (BBRY) BlackBerry Out

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As more employees bring their own devices to work, employers increasingly need efficient ways to keep all those gadgets secure. To that end, Research In Motion Ltd (NASDAQ:BBRY) BlackBerry has announced its Secure Work Space solution for Apple Inc. (NASDAQ:AAPL) iOS and Google Inc (NASDAQ:GOOG) Android, which separates work apps and data from the employee’s personal apps and data in a streamlined manner. Thanks to the multiplatform support, BlackBerry has created a potentially massive opportunity to monetize non-BlackBerry devices.

Research in Motion Ltd. (BBRY)According to Forrester Research, 200 million employees will bring their own devices to the workplace by 2016. Assuming that’s an accurate measure, Research In Motion Ltd (NASDAQ:BBRY) BlackBerry’s addressable market could potentially be as large as 190 million devices, based on its coverage of 95% of smartphones shipped in the first quarter. At $99 per year per device, I wasn’t kidding when I said this could be game changing for Research In Motion Ltd (NASDAQ:BBRY) BlackBerry’s business.

Getting real with it

It’s unrealistic to say that Secure Work Space will capture 100% of its potential addressable market, generate more than $18.8 billion in service revenue, and that makes the stock a screaming buy today. Based on a potential total addressable market of 190 million devices, here’s a more realistic look at how Secure Work Space could be accretive to earnings in 2016:

2016 Secure Work Space Capture Rate Subscribers (millions) Projected EPS Boost ($99 per device) Projected EPS Boost ($50 per device)
1% 1.9 $0.31 $0.16
2.5% 4.8 $0.77 $0.39
5% 9.5 $1.54 $0.78
7.5% 14.3 $2.31 $1.17
10% 19 $3.09 $1.56
15% 28.5 $4.63 $2.34
20% 38 $6.17 $3.12

Source: Author’s calculations and Research In Motion Ltd (NASDAQ:BBRY) BlackBerry. EPS = earnings per share. Projected EPS based on 524.16 million BlackBerry common shares outstanding as of June 24, 2013.

To arrive at projected EPS, I took Research In Motion Ltd (NASDAQ:BBRY) BlackBerry’s full-year 2012 service and software segment’s gross profit margin of 86% and applied the same percentage to Secure Work Space’s annual projected revenue. With analyst consensus expecting BlackBerry to lose $0.85 cents a share in 2015, it wouldn’t be out the question for Secure Work Space’s revenue to offset some or all of those losses.

Great positioning

According to Gartner Inc (NYSE:IT), the enterprise mobile device management industry is undergoing a shift toward “container”-based solutions thanks to bring-your-own-device policies. Luckily, BlackBerry’s Secure Work Space solution puts a secure “container” around any sensitive information stored on a device, putting it in an excellent position to benefit. As you can imagine, BlackBerry isn’t the only game in town. In fact, there are more than 128 mobile device management vendors, all of which are likely vying to create container-based solutions. Where BlackBerry can stand out from the crowd is with its rock-solid security reputation and its familiarity among IT administrators. If push came to shove, BlackBerry could lower prices to remain competitive and it would likely still benefit the bottom line, assuming BlackBerry’s 2012 software and service gross profit margin could be maintained.

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