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BlackBerry is Black-Bear-y again

May 8, 2014: 1:19 PM ET
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BlackBerry surged earlier this year on turnaround talk. But skeptics are back on top in what's been a see-saw ride for the stock.

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.

Just a few months ago, investors were head over heels (resisting the urge to throw in a YouTube clip of The Go-Go's ... or Tears for Fears ... #ilovethe80s!) for new BlackBerry CEO John Chen.

Shares of BlackBerry (BBRY) were up nearly 50% in 2014 through the end of February. At that time, the stock was far and away the top performer in CNNMoney's Tech 30 index.

BlackBerry fans were optimistic about Chen's plans to refocus the struggling smartphone maker's strategy on its core business customers ... a market segment that the company refers to as professional consumers or "prosumers."

(Remember that Buzzword Bingo game from the last tech bubble in the late 1990s? "Prosumer" easily would make the 2014 version along with "social," "cloud," "phablets," "Internet of things" and "wearables.")

Related: Is John Chen the most doomed CEO?

The stock was also benefiting from the hype surrounding messaging services. Facebook (FB) had just purchased WhatsApp for a staggering $19 billion. And that deal reminded Wall Street that BlackBerry had its own in-house BBM (BlackBerry Messenger) platform.

Maybe Chen would be able to find a way to sell that unit? Or at least make more money from it? So went the bull thesis.

That argument is falling on deaf ears now. The stock has plunged more than 30% since hitting its high point for the year. Shares are now essentially flat in 2014. This stock is once again Black-Bear-y.

What happened?

The sell-off can be partly blamed on more macro conditions than BlackBerry-specific problems. Momentum tech stocks (and BlackBerry amazingly enough was one of them earlier this year) have all been hit hard in the past few weeks as investors gravitate more toward steady, dividend-paying blue chip companies.

But investors may also be wondering if BlackBerry's turnaround is for real. There are still major concerns about its declining sales and market share, a steady stream of red ink and deteriorating balance sheet.

BlackBerry announced at the end of March that it had $2.7 billion in cash at the end of its last quarter, down from $3.2 billion at the end of the previous quarter. BlackBerry can't keep burning through $500 million in cash every three months. So that's clearly scaring investors.

"We don't own BlackBerry. There are too many unknowns and uncertainties," said Leslie Thompson, co-founder of investment firm Spectrum Management Group. "With tech stocks, we want companies with strong balance sheets that can be nimble and strong market positions."

Along those lines, Thompson said her firm owns tech leaders such as Apple (AAPL), Google (GOOGL), EMC (EMC) and Qualcomm (QCOM).

Related: T-Mobile no longer selling BlackBerry

Still, it may be a mistake to bust out a bugle and start playing Taps (or the Canadian/British military equivalent ... Last Post) for BlackBerry just yet.

While the company's viability remains in question, there are some reasons to believe that Chen has a little time to turn things around.

BlackBerry just announced on Monday that it was selling a majority of its Canadian real estate holdings for nearly $300 million. (The company will remain headquartered in Waterloo, Ontario.) That sale gives Chen more cash to put to use.

And some investors still think that BlackBerry could eventually get sold ... in pieces or parts. BlackBerry had been tinkering with the idea of a sale last year before bringing Chen on board. But it's not out of the realm of possibility that Chen might eventually be able to find a willing buyer. After all, he did sell his last turnaround effort -- Sybase -- to SAP (SAP) for a tidy sum in 2010.

Related: Court victory for BlackBerry against Ryan Seacrest-backed Typo

One short seller who used to be bearish on BlackBerry said it's a risky stock to bet against currently because of the possibility of a corporate break-up.

"We would not short it now as we feel it is trading for cheaper than the sum of all the parts," said Brad Lamensdorf, co-manager of Ranger Bear Equity (HDGE), an actively managed exchange-traded fund that shorts individual stocks.

And over on Mergerize, a new Website that is an offshoot of crowdsourced earnings tracker Estimize, there is at least one brave soul who thinks the company could get taken over for a juicy premium.

A Mergerize user named Shanan Levin is predicting that Microsoft (MSFT) will buy BlackBerry for $6 billion. That's 56% more than BlackBerry's current market value.

Levin's rationale? "Buying BBRY is a good way for MSFT to keep a tight grip on enterprise customers still using BBRY devices and software along with their Windows software."

That may be true. But Chen still has to prove that BlackBerry isn't losing that "tight grip" for good.

Related: Things go from 'bad' to 'less bad' for BlackBerry

It's encouraging that Chen seems to be doing all he can to stabilize BlackBerry. Analysts are still predicting a loss of $1 a share for this fiscal year, according to estimates from FactSet. But that would be a narrower loss than a year ago. It's also a smaller loss than what analysts had forecast at the start of the year.

Still, unless BlackBerry can narrow its losses while also regaining momentum on the top line, investors are going to remain nervous. And the numbers there don't look promising.

Analysts have a consensus revenue estimate of $3.96 billion for this year. That's down sharply from last year -- and estimates are heading in the wrong direction. Analysts had expected sales of $4.3 billion at the beginning of 2014.

So the days of BlackBerries being CrackBerries may be long gone. There aren't nearly as many people addicted to the mobile messaging device anymore. If Chen is going to save the company from the same fate that met Palm, he has to find a way to get subscribers hooked again.

Reader Comment of the Week! This award was pretty much wrapped up Monday morning after a certain demonic reader responded to my tweet about whether Google should get California Chrome to appear in ads for its browser if the horse goes on to win the Triple Crown. (I hope he does. Been waiting since 1978! Come on!)

Ha! Can you give a thoroughbred Sriracha sauce? Probably not a good idea.

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    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.

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