BlackBerry isn't dead
Blockbuster, Borders, Brookstone, BlackBerry — one of these things is not like the others. What once was a household tech name is now a memory of the past. But while BlackBerry is no longer considered a competitor to moguls Apple and Samsung, it has moved on to a new audience: the automotive industry.
Ten years ago, cell phone users nationwide were typing away on their mobile devices with a physical QWERTY keyboard. In fact, BlackBerry held roughly 20 percent of the smartphone operating system market share. It built its own operating system from scratch, and made the unique decision not to have it be open source — unlike that of Android, which briefly became a security nightmare. For this very reason, BlackBerry was picked up by businesses and governments worldwide. But despite its recent switch to an Android-based operating system, it prides itself on a value proposition of security — to the point of former President Barack Obama being permitted to use his BlackBerry throughout both his terms, and El Chapo’s reliance on the mobile device to conduct his high-stakes activities.
But while blackberry jam reigns as a top-five preserves flavor in the U.S., BlackBerry is taking strides to preserve itself. Pick any lens, and it will show BlackBerry on an inverse hockey stick. Market share? Revenue? Shipments? All of the above reveal a steep decline. But while many write BlackBerry off as the next company to file for Chapter 11 bankruptcy, CEO John Chen begs to differ.
After arriving far too late to the touchscreen party, the company marked its turning point in 2016 with an exit from making its own cell phones, now relying on Indonesian partners for manufacturing the smaller mobile phone business segment. In 2017, BlackBerry saw a $940 million dollar windfall after winning a lawsuit against chip manufacturer Qualcomm for overcharging on royalties. With this momentum, BlackBerry followed behind IBM, Microsoft and others in pursuit of a critical pivot: from hardware to software. The difference? Chen took BlackBerry’s superior positioning in security from its cellphone heyday, and saw an alluring opportunity in auto.
Thus was born BlackBerry Technology Solutions. With a dire need to innovate in high-margin and emerging business areas, BlackBerry created BTS, which is upheld by 3 main pillars: QNX licensing, Radar asset tracking, and Jarvis code scanning. This all is to maintain its edge on cybersecurity, radar tracking, and the automotive industry in the race to driverless cars. But what does that really mean?
In 2010, BlackBerry acquired QNX Software Systems to improve its operating systems. QNX was implemented in the BlackBerry PlayBook tablet in 2011 and in the BlackBerry 10 in 2013, and picked up by numerous car companies soon thereafter. In fact, in 2018, it was found that 125 million vehicles now use QNX technology for car infotainment, competing directly against Microsoft's Windows Embedded Automotive.
But what exactly is car infotainment? Your radio, USB and phone connectivity, rear parking assistance, hands-free Bluetooth capability, navigation system and fuel sensors are all powered by car infotainment software. QNX is also being used to improve software for autonomous cars. It can handle complex code needed to help driverless cars absorb data, and help a car’s software prioritize functions based on its environment and decision-making. While QNX doesn’t get in front of many people through the BlackBerry cell phone, drivers of BMW, Ford, General Motors and other car companies use QNX without even knowing it. In fact, just over a year ago, Chen announced that BlackBerry software powers 60 percent of connected cars on the road today.
The second pillar of BTS is BlackBerry Radar, which provides real-time data for the trucking industry, with the ability to track assets and manage fleets through dashboards for management. Radar is one example of the firm’s greater “internet of things” mission to combine real-time data with everyday objects. Investors’ biggest concern? BlackBerry management has been concealing Radar’s revenue performance for two quarters now.
BlackBerry Jarvis, the third prominent asset of BTS, was released just over a year ago to fortify self-driving car software in order to prevent hackers from finding software vulnerabilities. Today, a majority of a car’s typical functions are controlled by software, from adaptive cruise control to anti-lock brakes, to the sensors that flash when you are near other cars. A hacker being able to manipulate these functions could mean the difference between safety and a major car accident. With dozens of industry players racing to achieve the first self-driving car, cybersecurity is on the mind for most automakers. As Chen envisioned, this is Jarvis’ sweet spot.
These components are the pillars of BTS, but it is important to remember that there is more to BlackBerry than just BTS. In fact, the division is only the third largest revenue driver of the firm. While BlackBerry’s company vision resides within BTS, there is significant room for improvement from a financial standpoint. However, it is headed in the right direction. In the last fiscal quarter, Chen stated that BTS revenue grew 23 percent over the last year, and QNX is taking the lead on this growth.
While BTS is functioning proof of BlackBerry’s new vested interest in automotive cybersecurity, its recent acquisition of cybersecurity firm Cylance for $1.4 billion is perhaps the most compelling stage of its blueprint. While it is a pricey one, the acquisition is said to rapidly grow the QNX arm of BTS, and perhaps initiate a cybersecurity consulting division, which Cylance originally offered as a standalone entity.
Interestingly enough, the market did not react significantly to the acquisition announcement three months ago. In fact, many Wall Street analysts’ price target for BlackBerry remained unchanged. Investors are evidently approaching BlackBerry’s transformation with caution, which is understandable considering the company’s relatively horizontal share price movement, and slow-moving pivot from its cellphone-associated brand to the auto industry.
Just last Thursday, BlackBerry announced that it had officially completed the acquisition of Cylance. As with any acquisition of a large firm, it will take a sizable amount of time before investors get to see tangible results. Until then, BlackBerry’s Enterprise Software, licensing and its 44,000 patents will take lead on keeping the company afloat.
While BlackBerry is by no means a company at the forefront of tech news today, it is far from having its epitaph written.