Wells Fargo Cuts Estimates on Blackberry (BBRY)

Wellls Fargo analyst, Maynard Um, met with BlackBerry (NASDAQ: BBRY) management team and though the tone was positive, he believes estimates will have to come down. Cannibalization from a lower priced android handset may pressure pricing and street consensus includes tax recoveries that are not likely to be realized.

Management focus is on 3 priorities:

1) building the channel over the next 12 months to further drive the enterprise software business

2) driving QNX and Internet of Things (IoT) platform

3) focus on its device business (announced T-Mobile, Verizon, Sprint as additional Priv carriers).

Reducing F16E EPS from -$0.27 to -$0.24 and F17E to -$0.16 from -$0.03 due to tax payments vs prior expectations for tax recoveries and slightly lower software margins (Street: -$0.29/-0.35). The Street Consensus currently embeds tax recoveries and there is risk of high end Priv cannibalization by a new mid-range Android product.

The analyst's concern revolves around the hardware business, which is losing money, and in a market where few are making profits. Management seems committed to the business (for now) though he thinks an exit from the handset business would be highly accretive to earnings.

For an analyst ratings summary and ratings history on BlackBerry click here. For more ratings news on BlackBerry click here.

Shares of BlackBerry closed at $8.00 yesterday.

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