Lingering Doubts about Chen's BlackBerry

 | Mar 30, 2014 | 6:00 PM EDT
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Despite that 25% rise in BlackBerry's (BBRY) stock over the last four months, the bears on the stock still exist in full force: One-quarter of the share float is currently held short.

Meanwhile, on Friday's earnings call there was no terrible news of which to speak, as CEO John Chen continued to describe his turnaround efforts. However, there wasn't much good news for bulls to hang their hats on, either.

The good news was that Chen has continued to cut costs in the past quarter, wringing out $300 million worth of operating expenses. He also noted that the BlackBerry Messenger had increased its monthly average users (MAUs) to 85 million, up from 80 million in the prior quarter. Also, he said the QNX operating system continued to do well in its auto niche -- though the worry lies in when that product will grow beyond just a niche.

Going into the call, investors seemed most interested in how the management team was doing when it came to to its longstanding bogey -- getting to positive operating cash flow by the end of February. Chen continued to sound upbeat on meeting that target, and he sketched out how he believed the company was ahead of schedule.

However, there were still lots of questions embedded in the quarter's results.

1. It's unclear when BlackBerry will be able to make money off of its BES 10 enterprise server for corporate clients. Management said it would release a BES 12 version in the early fall in order to help customers who didn't want to get off their old server that ran BES 7, though analysts worried that this would further delay revenue. The reality is that they probably weren't going to be generating BES 10 license revenue anytime soon without coming up with this BES 12 plan, so they simply had to push it.

2. BlackBerry laid another egg on the devices sold, as well: Only 1.3 million shipped in the quarter, whereas analysts were expecting something like 1.5 million to 1.8 million. Of course, it's great that Chen struck the deal with Foxconn last quarter to reduce inventory risk. However, the deal hasn't come into effect yet, and the pact itself won't make the BlackBerry devices any more popular.

3. It seems clear that Chen wants to remake BlackBerry into a software-and-services company and move away from hardware. Given this, he has to get the profit from things like BBM, QNX and BES 12 -- yet these are all still in their infancy as products. It's great that BlackBerry has 85 million MAUs. However, it will take time to make money from the message-board-style, corporately sponsored Channels, and from sending money to others.

For evidence as to whether Chen will slay in the coming month, here's one of the sacred cows I'll be watching: the question of whether he can strike a deal with Google (GOOG) to start developing an Android OS that still delivers "enterprise security." If BlackBerry can ink a similar deal here to what Microsoft (MSFT) and Nokia (NOK) did a couple of years ago -- one involving a big, fat research-and-development contract -- investors would welcome it.

There's still a lot of wood to chop at BlackBerry, and Chen is doing a solid job. Bears will likely need to hear more substantive news on the turnaround before they're willing to cover. They didn't get that Friday.

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