Veteran BlackBerry Analyst Says Company Needs to Ditch Handsets

  • Macquarie: smartphone unit is worth $0 and should be shut down
  • BlackBerry switched to Google’s Android system last year

The BlackBerry Ltd. Passport smartphone.

Photographer: Michael Nagle/Bloomberg

A veteran Wall Street analyst who covered BlackBerry Ltd. for more than a decade has come back from a two-year hiatus to warn investors the company’s handset unit is dragging down the business and should be shut down.

Gus Papageorgiou, who joined Macquarie Group in March, initiated coverage of BlackBerry with a sell rating, in line with six other analysts, saying the firm’s heralded shift to software won’t come fast enough to offset declining revenue. Papageorgiou previously covered BlackBerry for Bank of Nova Scotia from 2002 until leaving the bank in 2014, according to data compiled by Bloomberg. BlackBerry slipped 0.7 percent to $6.64 at 2:36 p.m. in New York. The stock was down 28 percent this year through Tuesday’s close.

Chief Executive Officer John Chen said in December that Blackberry will “always be in the phone business.” But just last month he said the “No. 1 goal” the company has is to ramp up software and services. BlackBerry switched last year to making phones that run Google’s Android operating system, a move that gives its customers access to a universe of applications and features that weren’t available on BlackBerry’s own system. The Waterloo, Ontario-based company plans to unveil two new phones before March 2017, Chen said in May.

“That strategy has yet to pay off,” Papageorgiou said in a note to clients. “We remain skeptical that the company can make the handset business a success. It does not have any meaningful scale and we are not convinced the market will see security as a differentiator for Android devices.” About 40 percent of BlackBerry’s revenue still comes from handsets.

BlackBerry didn’t immediately respond to a request for comment.

It’s unlikely other companies are interested in acquiring the shrinking device business either, Papageorgiou said. Shutting it down instead would boost profit margins, he said.

“We believe the market would applaud the company exiting the device business,” Papageorgiou said.

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