For BBRY stock, the market reaction to today's (Tuesday) missed earnings was a familiar one.
The once high-flying BlackBerry Ltd. (Nasdaq: BBRY) stock slumped about 4% to below $9 a share. In its heyday BlackBerry stock traded at more than $100 a share.
BlackBerry posted a loss of $0.05 a share for its fiscal first quarter, missing forecasts for a loss of $0.04. Revenue also missed, coming in at $658 million, below expectations for $680 million.
The revenue figure was down 32% from the same quarter a year ago and marked the seventh consecutive quarter of double-digit declines.
BlackBerry is still trying to stop the bleeding from its tragic miscalculation of the impact of Apple Inc.'s (Nasdaq: AAPL) iPhone. The global market share of its mobile phones has plummeted from 20% to 0.4% over the past five years.
Now Chief Executive Officer John Chen is trying to rebuild BlackBerry by focusing on its software business.
Chen has made some clear progress. Revenue from software and technology licensing was up 150% in the quarter ended May 30, to $137 million. And in a statement, he struck an optimistic note.
"I am pleased with the strong performance of our software and technology business. This is key to BlackBerry's future growth," Chen said. "Our financials reflect increased investments to sales and customer support for our software business. In addition, we are taking steps to make the handset business profitable."
For investors, the question is whether Chen can make BBRY into a profitable niche company based on software and licensing.
The company does have a strong reputation for security in mobile devices - a big asset in a world beset by cyberattacks. Chen has built on that by acquiring three security-focused companies over the past year.
He's acknowledged reality by pushing ahead with software products that run on the two dominant smartphone platforms, the iPhone and Google Inc.'s (Nasdaq: GOOG, GOOGL) Android.
BlackBerry also has introduced software that helps connect smaller networked devices to the Internet of Things.
And the company today announced a long-term patent cross-licensing agreement with Cisco Systems Inc. (Nasdaq: CSCO).
In short, BlackBerry has done just about everything it can to get back on its feet and revive BBRY stock.
But here's why it may not be enough...
Why BBRY Stock Is a Risky Buy
Few share Chen's optimism.
While the emphasis on software is the best move for BBRY, it's not necessarily a clear path to profits.
The sticking point is that BlackBerry has a lot of competition in the world of mobile-oriented software and services. And it ranges from the small and nimble like Mobileiron Inc. (Nasdaq: MOBL) to the medium-sized like Citrix Systems Inc. (Nasdaq: CTXS) and VMware Inc. (NYSE: VMW) to true giants like International Business Machines Corp. (NYSE: IBM) and possibly Microsoft Corp. (Nasdaq: MSFT).
BlackBerry is the second smallest by market cap on that list, so it figures to get some elbows in its face.
Still, BBRY could survive as a fringe player for a long time. But if that's how it goes, BBRY stock will stagnate.
Probably the best hope for owners of BlackBerry stock is the prospect of an acquisition. BlackBerry's deep portfolio of 44,000 patents, strength in security, and relatively cheap price tag (it has a market cap of under $5 billion) make it an attractive target for a wide range of suitors.
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In January, Samsung was reportedly trying to buy BBRY. In May there was talk that Microsoft would offer $7 billion for BlackBerry. Shortly after that came rumors that Apple and Chinese upstart Xiaomi were thinking about scooping up the company.
It's not hard to think of others - IBM, Microsoft, and Google, to name a few.
The premium on the BBRY stock price from an acquisition, likely falling in the $12 to $13 range, easily beats the flat one-year price target of $9.07.
With its future unclear, BBRY stock is a risky buy. But current shareholders may as well hang on. Chen's strategy could somehow pay off. Or an acquisition could save the day.
But one thing's for sure - BlackBerry will never again be the superstar it was in the mid-2000s.
Follow me on Twitter @DavidGZeiler.
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About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.