What’s BlackBerry Worth?

There wasn’t much movement in BlackBerry shares Monday, a day after the stock plunged 16%.

On Monday, BlackBerry (BBRY) said it would raise $1 billion by issuing debt convertable to stock, in lieu of a buyout deal.  BlackBerry also said John Chen will take over as interim CEO, replacing Thorsten Heins.

BlackBerry shares rose 17.5 cents, or 2.7%, to $6.67 Tuesday. On Monday, the stock fell 16% to $6.50. Here’s a smattering of analysis from Wall Street:

Pacific Crest analysts James Faucette and Brad Erickson, who have an Underperform rating on the stock, write that BlackBerry’s intellectual property is worth $2 to $4 per share, other assets are worth $1 to $2 per share, and with $1 billion in debt, the shares are worth $2 to $4.

Deutsche Bank Analyst Brian Modoff upgraded the stock to Hold, but maintained his target price of $6.

“The investment universe is filled with stories of brilliant managers being outdone by businesses with terrible economics and this is a high risk situation by any measure. It is with this sentiment, that we remain cautious on the prospects of a complete turnaround similar to that of Mr. Chen’s old firm, Sybase; however we think some value can be salvaged from Blackberry and we believe that Mr. Chen could provide that strategic direction.

The team of analysts at Raymond James maintained a Market Perform rating on BlackBerry, with “high risk” and no target price. They write:

“Although with Fairfax [Financial Holdings, its largest shareholder] could not complete an acquisition of BBRY, they showed renewed confidence by investing another $250 mln (as part of the $1 billion raise). The addition of Chen as interim CEO from MDM vendor Sybase/Afaria indicates a likely gradual transition of BBRY into an MDM player. The capital raise gives BBRY a bigger cushion for the coming restructuring/transition. Given the relatively small size of the MDM market (2013: $560 mln, +12% year over year, according to ABI Research) and BBRY Services under severe pressure given its new service menu/subscriber losses, we believe break-even remains elusive unless BBRY undergoes significantly more restructuring.”

Deutsche Says Emphasize Tech, Reduce Financials, Energy

Deutsche Bank Chief U.S. Equity Strategist David Bianco has shifted his focus to tech investing, saying valuations are attractive, while risks and dividends should provide defensive growth.

Key to the story: more IT spending. Excerpts from what Bianco wrote Monday on the subject:

“Last week we increased our overweight on Technology and reduced Financials and Energy to equal weight from overweight because Tech is the only sector still at an abnormally low PE [price-to-earnings ratio]. All other sectors are back to their pre-recession PEs. The decline in Tech’s PE occurred mostly at mega-cap Tech ($40bn+ market cap). The mega-cap Tech PE went from well above the S&P PE to well below as its EPS growth slowed and disappointed. This occurred while mega-cap Consumer Staples and Health Care PEs … inched higher as investors were attracted to “defensive growth” stocks amidst low interest rates. But mega-cap Tech’s risk measures and dividend yield have become increasingly similar to those two defensive growth sectors.

Mega-cap Tech earnings per share did not drop during the 2008-09 recession, demonstrating impressive resilience completely unlike 2001-02, and its earnings-per-share grew strongly in 2010-11. Although its growth slowed and disappointed in 2012-13, it was as good … as mega-cap Staples and Healthcare. Tech’s 2014 EPS growth should accelerate on improving corporate IT spending and yet its lower risk characteristics should persist. The average dividend yield of 2.2% at mega-cap Tech is not far behind that of mega-cap Consumer Staples and Health Care at 2.5%, but has far-superior growth potential, owing to significantly-lower payout ratios and less leverage. Yet the average mega-cap Tech PE — at 14.5 times estimated 2014 EPS — is three points lower than the average mega-cap Staples and Health Care PE.

SBA Stock Up 3.5% As Wireless Tower Losses Narrow

Analysts are raising their outlook for SBA Communications after the wireless tower operator narrowed its loss-per-share in the latest quarter.

SBA Communications (SBAC) shares are up $3.06, or 3.5%, to $90.79.

The company reported third-quarter loss of 9 cents per share, better than the 13-cent loss analysts expected. Funds from operations came in at $1.04 per share, better than the 88 cents expected, according to Thomson I/B/E/S.

S&P Capital IQ Analyst James Mooreman pointed to SBA’s operations in Latin America and raised his target price on the company by $12 to $102. That is  based on a multipole of 19 times S&P’s 2015 free-cash-flow estimate. He writes:

“We narrow our 2013 loss per share estimate by 12 cents to a 64-cent loss, increase [our] 2014 [estimate] by 14 cents to 12 cents per share, and 2015′s by 18 cents to 90 cents. Third-quarter earnigns per share of 16 cents, vs. a 25-cent loss, was 36 cents above our estimate due to forex gains and a gain on the sale of a claim. We expect SBAC to have a strong year in site leasing as carriers deploy LTE networks. SBAC’s recent acquisitions, including in Brazil, should help drive growth.”

Raymond James analysts Ric Prentiss and Charlie Castillo, who have a Strong Buy rating on the stock, increaed their target price to $106 from $96 Tuesday. Their reasoning:

“1) The fundamentals of the U.S. tower industry are very strong with all four national wireless carriers actively deploying 4G LTE coverage that is being followed by adding capacity, 2) a disciplined expansion into international markets can elongate high AFFO/share growth rates, and 3) SBA Communications can continue to expand its portfolio while staying in its target leverage range of 7.0-7.5 times.”

AOL Jumps 9% As Ad Revenue Rises

AOL stock rallied after the media company reported a 6% increase in revenue year-over-year thanks to global advertising improvements, even though earnings were weak.

AOL (AOL) shares were up $3.50, or 9%, to $42.21 in mid-afternoon trading.

The company reported third-quarter earnings of 24 cents per share, lower than the 35 cents expected by analysts, according to Thomson I/B/E/S.  Diluted earnings per share were 2 cents; profits were impacted by $19 million in pre-tax restructuring costs, and non-cash asset impairments of $25 million in AOL’s community news website operation, called Patch. But global display advertising revenue rose 5% on improved pricing, while search revenue increased 3%.

Cantor Fitzgerald analysts Youssef Squali, Naved Khan and Kip Paulson, who have a Hold rating on the stock, think shares could sink below today’s price. They write today:

“AOL’s 3Q results were ahead of expectations and generally in line with AOL’s longer-term strategy of reigniting growth and improving margins. Ex. Adap.tv, however, the results were a bit less impressive, with top-line growth of +2.3% year over year. While management’s execution to-date has been strong (ex. Patch,) continued stagnation in O&O Display and Search keep us on the sidelines. We’re tweaking our estimates and establishing a new 2014 price target of $44/share.”

T-Mobile Shares Sinking: Subs Up, Per-User-Revenue Down

Shares of the fourth-largest U.S. wireless carrier, T-Mobile, were lower in midday trading after the company reported results that disappointed on some metrics.

T-Mobile US (TMUS) fell 46 cents, or 1.6%, to $27.88. The company’s quarterly results  included the addition of 1 million customers, with an increasing number of MetroPCS pre-paid customers. The strategy of “eliminating customer pain points” with simple language and fewer contracts is helping. But “branded postpaid average revenue per user (ARPU) decreased quarter-over-quarter by $1.40 to $52.20, primarily as a result of the continued rapid adoption of Value and Simple Choice plans.”

T-Mobile maintained its guidance for the year; analysts are looking for earnings per share of 21 cents for 2013. Update: T-Mobile reported a net loss of $36 million, deeper than the $16 million net loss in the second quarter, the Wall Street Journal reports.

Nomura analysts Adam Ilkowitz and Donald Chen, who have a Neutral rating and $23 price target on the stock, note that T-Mobile U.S. branded, postpaid net subsriber additions were 648,000, better than the 428,000 consensus forecast, a result that “was impressive given the lack of tablets” in that number. MetroPCS market expansion is boosting the number of pre-paid customers. But revenue-per-user weakness is a big negative. The Nomura analysts write that future growth is a concern, “as investors wonder what management will do next to drive net adds as other carriers focus on building out coverage/speed and speculation over M&A activity.”

As noted in the Barron’s interview with Verizon Communications (VZ) CEO Lowell McAdam this past weekend, AT&T (T) is about a year behind Verizon Wireless in building its 4G LTE network, while rivals Sprint (S) and T-Mobile US are two years behind. (see “Answering the Call,” subscription required.) Verizon is betting big on the U.S. wireless market with its recent purchase of Vodafone‘s (VOD) 45% stake in Verizon Wireless for $130 billion in cash and stock.

But as vacationing colleague Tiernan Ray noted in his latest Barron’s column, T-Mobile shares “are up 113% in 2013 thanks to the merger with MetroPCS announced last fall and completed in May. T-Mobile is now ‘taking customers hand over fist,’ says Craig Moffett, a former telecommunications analyst with Bernstein Research who is now running his own shop, Moffett-Nathanson.” (see “T-Mobile Moves to Unseat Verizon and AT&T,” subscription required.)

Morning Read: Apple Behind Rise in Pandora, GT Advanced Tech

A few things happening this morning in your world of technology:

Pandora Media (P) shares are up nearly 3% this morning. The company said its market share crept higher despite the unveiling of iTunes Radio by Apple (AAPL), whose shares are down fractionally this morning. It would seem competition is a positive: Pandora’s hours of listening were up 8% in October, year over year. 

Shares of GT Advanced Technologies (GTAT) are up 20% this morning. The New Hampshire semiconductor company, with a market capitalization of more than $1.2 billion, announced a $578 million contract with Apple (AAPL) to supply equipment at an Arizona plant.

More buzz on the potential merger between Time Warner Cable (TWC) and Charter Communications (CHTR). David Faber on CNBC downplayed talks. But Reuters said Friday that talks between the parties – including John Malone’s Liberty Media, which owns about a quarter of Charter, “restarted over the past few days, according to a separate source close to matter, but Time Warner Cable’s management remains cool to the idea of a tie-up.” (Reuters story here.) 

Some talk this morning via Bloomberg on the Economy on who would buy BlackBerry (BBRY) patents. Shares of BlackBerry are up 2.5% in morning trading. Qualcomm (QCOM), Google (GOOG), Broadcom (BRCM) or a Chinese operator all could want to own patents in the wireless business.

MKM Partners Upgrades Blackberry to Neutral, Cuts Price Target to $6

MKM Partners analysts raised its rating on Blackberry (BBRY) from Underperform to Neutral, but lowered their price target to $6 a share.

In a note published today, MKM analysts Michael Genovese and Matt Bielawski wrote that Blackberry’s failure to secure a buyer confirmed the analysts’ earlier view that the smartphone maker’s patents are not very valuable. It is showcased how difficult it is to get comfortable with the level at which subscribers and handset shipments may stabilize.

Now, MKM’s sum-of-the-parts calculations value Blackberry’s service profits at $4 a share, valued its patents at $1.50 a share and added 50 cents a share for QNX.

But why upgrade the stock to Neutral?

MKM expects Blackberry to become a more focused company, and argues that the new $1 billion debt offering illustrates Fairfax’s continued confidence in Blackberry.  Also, incoming interim CEO John Chen seems “shareholder friendly by all accounts.”

Blackberry closed today at almost $6.50 a share, down 16.4% from Friday’s close.

Piper Jaffray Downgrades NetApp To Neutral; Weak Demand, Compeition

NetApp (NTAP) shares continued a downward slide that began in September after analysts downgraded the storage equipment vendor citing weak demand and rising completions.

Piper Jaffray analysts Andrew Nowinski and Daniel Garofalo cut NetApp from Overweight to Neutral and cut their price target from $45 to 38. They wrote:

Given the relatively weak demand environment, coupled with increasing competitive headwinds, we see limited opportunity for upside to estimates going forward and would not be surprised if consensus estimates are reduced following the company’s upcoming earnings call in November 13.

NetApp gets 17% to 19% of its revenue from the U.S. federal government. But Piper‘s Nowinski and Garofalo argue that the government shutdown hurt spending in late September and into October. Add to that, rival EMC’s (EMC) second-generation VNX unified storage platform has narrowed the competitive advantages of NetApp.

Nowinski and Garofalo cut fiscal second-quarter sales estimate from $1.625 billion to $1.565 billion, which sits at the low end of management’s guidance and falls below the Street’s $1.61 billion consensus.

 At $38.68, NetApp shares fell 1.16% in market action today. The stock has fallen 12% since Sept. 19 when the shares closed at a 52-week high of $44.16.

Blackberry’s Chen: No Plans to Close Handset Business

Blackberry (BBRY) have no plans to shutter its loss-making handset business and has sufficient resources to stage a turnaround, according to incoming interim CEO John Chen.

In an interview published Monday by Reuters, Chen was quoted, “I know we have enough ingredients to build a long-term sustainable business. I have done this before and seen the same movie before.”

What movie? Named today to replace Blackberry CEO Thorsten Heins, Chen is credited with performing a similar turnaround in the late 1990s at enterprise software and services company Sybase before it was acquired by SAP (SAP) in 2010.

And a year ago, Chen was named a senior advisor at Silver Lake, a private equity firm that recently partnered with Michael Dell to takeout computer maker Dell.

On Monday, Blackberry scrapped months-long sale efforts today and instead signaled its intention to continue – for now – as a public company with new leadership and a $1 billion investment from an investment group led by major shareholders.

The shares plunged 16% today amid growing worries about Blackberry’s misfortunes. Sales of a new line of BlackBerry phones have flopped and the company is burning through cash. Blackberry has trimmed costs by slashing jobs and writing down its inventory of unsold phones.

Still, some analysts argue that the company will need to cut more to stay afloat during a transition period.

For more of Chen’s interview, read here

Analysts Cut BlackBerry Targets; Nomura: No Reason To Own It

With Blackberry’s (BBRY) attempt to sell itself now on the scrap heap and no other buyer in sight, sell-side analysts are ditching their price targets for the troubled smartphone maker.

National Bank Financial downgraded the stock to Underperform from Sector Perform and cut its price target from $9 to $3. Meanwhile, analysts at Credit Suisse, Canaccord Genuity and FBR cut their 12-month stock price outlooks from $9 to $7, $7 to $6 and $8 to $6.50 respectively.

Canaccord analysts T. Michael Walkley, Matthew Ramsay and Siddharth Sinha wrote:

…we believe a sale of BlackBerry is no longer imminent and few – if any – candidates remain to purchase the company in its entirety. While we maintain our belief BlackBerry will ultimately end up selling the company due to the difficult competitive smartphone market and low probability BlackBerry 10 can return BlackBerry to sustained profitability, we now believe a breakup is more likely than an outright sale and fundamentals will continue to deteriorate over a now-longer public sale process under new management.

Back in September, Blackberry agreed to a tentative, $4.7 billion deal to sell itself to Fairfax Financial Holdings. Fairfax would then take Blackberry private, betting that the company would have a better chance of staging a comeback away from the eyes of the public markets.

Investors were expecting an update today on Fairfax’s bid. Instead, Blackberry abandoned efforts to sell itself, replaced its chief executive and raised $1 billion selling convertibles to Fairfax and a group of institutional investors.

Investors did not approve, sending the shares falling 16% to %6.50 in afternoon market action.

Not all sell-side analysts cut their price targets. Normura analysts Stuart Jeffrey and Woo Jin Ho maintain their $8 price target. Still, the pair are hardly bullish on Blackberry. In a note published today, they wrote:

We believe the failed acquisition bid likely accelerated the search for an alternative and accelerated the pace of declines in devices and services sales. We still see no strategic buyer emerging for Blackberry, and the company looks likely to have to restructure operations significantly while public if no other financial bidders emerge, which seems unlikely in our view. As long as the company continues to sell handsets below cost and is unable to stem the decline in services revenue and subscribers there’s no reason to own the shares, and no sum of the parts to provide a floor value, in our view.