In the incredibly competitive smartphone field, BlackBerry Ltd. (NASDAQ: BBRY) has been battered, and it seems nearly impossible to believe that it can turn itself around. Most analysts’ sentiments reflect this belief because they are generally all neutral or negative. Credit Suisse opines on where BlackBerry stands to go from here in its most recent report.

Kulbinder Garcha, Credit Suisse analyst, reiterated an Underperform rating for BlackBerry with a price target of $6. Credit Suisse maintains that the continued decline of service revenue coupled with the limited visibility of mobile device management (MDM) remains the principal risk to the turnaround. The firm continues to have reservations on BlackBerry’s ability to ramp up software and operate more competitively.

Despite the hardware business generating a profit again this previous quarter, BlackBerry realized a larger than forecast drop in hardware revenue to $277.2 million, down 24% quarter over quarter. Credit Suisse continues to believe that sustainable sell-through will prove challenging in the hyper-competitive smartphone market.

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Credit Suisse sees a rough road ahead for the services business based on its predictions that:

• Subscriber base will continue to erode.
• ARPU will fall due to the shift towards BB10.
• The monetization of EZ Pass remains difficult in a competitive MDM market environment.

The firm described in its report:

Furthermore, management highlighted a near term accelerated decline in SAF revenue (-15% q/q), which they expect to offset by doubling software revenue by the end of fiscal 2016 to $600 million. We remain skeptical that they can achieve this type of growth in software to offset the decline in their services business. Additionally, we are also concerned that gross margins in the services segments may start to come down as revenue pressures persist. We estimate services revenues of $846 million and $467 million for fiscal 2016 and fiscal 2017 [respectively].

Ultimately, Credit Suisse believes that it would be best for the company to break up, considering the inherent challenges in turning around the services stream and the subscale loss making hardware business.

Assuming BlackBerry shuts down the hardware business by the end of the 2015 fiscal year and winds down the services business by the end of fiscal 2016, the firm arrived at a net asset value (NAV) of $3.2 billion, or $6 per share, which suggests downside of roughly 35% from current prices.

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Shares of BlackBerry were down 1.1% to $9.02 Friday morning. The stock has a consensus analyst price target of $9.23 and a 52-week trading range of $8.59 to $12.63.

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