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BlackBerry, Nuance, Nokia: 3 Turnaround Stocks to Watch


Planned obsolescence has been a tech strategy for decades. These turnaround tech companies hope to get back to the future.

BlackBerry (NASDAQ:BBRY) stock gyrated wildly the day it reported quarterly results. After rallying pre-market, shares closed down 7.2% on the day. Investors taking a short-term view on the company were right to sell shares, but a closer look suggests BlackBerry's turnaround is on the right path. In the first place, cost cuts at the phone maker were a quarter ahead of schedule.

More importantly, BlackBerry and companies such as Nuance Communications (NASDAQ:NUAN) are moving toward becoming niche players in the embedded market. Investors aren't a patient bunch: They would rather sell now. But wise investors know the difference between short-term gains and long-term viability.

Let's look first at BlackBerry.

Old BlackBerry Relaunched

BlackBerry's plan to relaunch BlackBerry 7 (BB7) Bold devices broke with established precedent. The company's decision speaks volumes: BB10 is, for now, a failure relative to BB7. BB10 only has Q5 and Q10 keyboard models on the market. Future BB10 devices will need to have physical keyboards, a bigger screen, and a trackpad to gain traction.

Profitability on Horizon
John Chen, BlackBerry's CEO, reaffirmed the company will be profitable in fiscal 2016 (ending February 2016). As investors fret over worldwide market-share loss in smartphones, BlackBerry simply needs to sell more BlackBerry devices at a lower cost, but with a positive profit margin. Current BlackBerry devices sell at prices on par with premium Android and Apple iPhones. This is unsustainable at the consumer level. BlackBerry doesn't have the same app support from developers to justify the current pricing model. BlackBerry will probably need to lower initial prices of future premium devices to accelerate adoption of the devices at both the consumer and enterprise level.

Mixed Success in Z30 Is the Key to the Future

BlackBerry's Z30 tells much about the mixed drivers for BB10. The Z30 has a 5-inch screen, a solid build, and a long battery life. It lacks adequate carrier support, however. BlackBerry is spending little on advertising to boost Z30 sales. A proper balance in budgeting for advertising in the consumer space might help drive adoption for BB10, however.

Turnaround Plays Punished

Nokia (NYSE:NOK) is well on its way to focusing on the networking market, patents, and maps. Its shares turned around. Nokia is outperforming even Apple (NASDAQ:AAPL). Nuance and BlackBerry are down for the year.

BlackBerry's quarterly loss was a major event for the stock, but it was expected. The company sees itself as being on a track to profitability. Monetizing BlackBerry Messenger (BBM) remains of secondary importance, but it will happen as competitors like Facebook's (NASDAQ:FB) WhatsApp also look to monetize through advertising.

Editor's note: This story by Chris Lau originally appeared on Kapitall.

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Author holds positions in BlackBerry.
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