The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
Does BlackBerry have more lives than a cat?
Every time the company's stock hurtles from a stunningly great height, it somehow seems -- in cat-like fashion -- to land on its feet.
(Rumor has it that the Interwebz is all about cats. So by including the word cat multiple times at the top of my column, I hope that will boost the chances of it getting shared socially and optimized for search engines and all that cat jazz. Cat. C-A-T. In fact, a certain news site whose name rhymes with Fuzzweed had a story last year about a cute feline named Blackberry.)
And while BlackBerry's stock hasn't done as well as competitors Apple (AAPL) and Microsoft (MSFT), it has having a better 2014 than the two kings of the Android camp: Google (GOOGL) shares are down this year while Samsung's stock is flat.
Why is BlackBerry doing this well on Wall Street considering that the company continues to lose money and subscribers and is expected to post another huge drop in sales when it reports its fiscal first quarter results on Thursday? Hope. Springing eternal. Again.
CEO John Chen has a new plan to try and shock some life back into BlackBerry. Interestingly, it has little to do with BlackBerry's trademark smartphones. In mid-May, BlackBerry unveiled what it is calling Project Ion, an initiative to connect all types of devices to the Internet.
The clunky tech jargon for this trend is The Internet of Things. Some use the term "connected home" instead. But it's definitely a hot market right now. It's also getting crowded.
Apple is trying to increase its presence in it with its new HomeKit app while Google made a big splash earlier this year by purchasing startup Nest, a maker of "smart" thermostats and smoke detectors, for $3.2 billion.
So how does BlackBerry fit in? The company already has a big presence in the connected car market thanks to its QNX operating system, software that BlackBerry purchased from speaker maker Harman International (HAR) back in 2010.
Update 6/18: On Wednesday morning, after this column was first published, BlackBerry announced a deal with Amazon (AMZN) that will give BlackBerry users access to Android apps in Amazon's appstore later this fall. This will take effect following an update to BlackBerry's operating system: BlackBerry 10.3. It's a smart move.
It makes sense for Chen to emphasize BlackBerry's software over its hardware. If the company is going to survive (more about that in a bit) then it probably is going to be on the back of QNX. Heck, BlackBerry could eventually/finally become an attractive takeover target if Project Ion is successful.
But we've been here before. BlackBerry is a company that has had a history of false starts.
Still, I get why investors are optimistic. Chen is not responsible for any of the company's previous blunders. He is an outsider who has a track record of taking a sad software song -- Sybase -- and making it better -- by selling it to SAP (SAP). The hope is that lightning can in fact strike twice.
And even though the stock has been insanely volatile during Chen's short tenure, the trend is up. Shares have surged nearly 25% since he took over in November of last year. What's more, the stock is up more than 10% since the reveal of Project Ion.
Can Chen turn BlackBerry into another Sybase? Perhaps. But he won't have a lot of time to do so. And that's why, despite a smart strategic move to de-emphasize the hardware business, particularly the consumer smartphone market, the odds are against him.
The numbers just don't look good. Analysts expect BlackBerry to report a loss of $167.5 million in the first quarter and $535.4 million for the full fiscal year. Wall Street is forecasting losses for the next two fiscal years as well.
While BlackBerry still has a decent cash cushion, it won't last forever. The company finished its last fiscal year with $2.7 billion in cash, down from $3.2 billion at the end of the third quarter.
So the most important number to keep an eye on when BlackBerry reports its results Thursday will be its cash balance. If BlackBerry burned through another $500 million in cash, then Chen may need more than the Internet of Things to save the company. He'll need a miracle. Paging Mike + The Mechanics!
Cats get only nine lives. I think that the company may now be on its sixth or seventh.
Also, what's that term investors use to describe a stock that has a short rebound in the midst of a larger fall? Oh yeah. A dead cat bounce!
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