Money in Motion - Blackberry | Alpha Street

Money in Motion – Blackberry

July 23, 2019

Investors should start looking at Blackberry again. Under the leadership of John Chen, Blackberry has pivoted from a mobile phone company to a software company focusing on Threat Detection, End User Management, Internet of Things (IOT) and Autonomous Vehicles.

Note. This is not a full report. It just highlights the Bull Case (Positive) and Bear Case. (Negative)

Bull Case

  • Blackberry owns Cylance – Rapidly growing User Endpoint Management business.
  • Cylance was acquired for 7x Sales, Competitor Crowd strike trades at 40x Sales.
  • Cylance growing at 25 to 30% of Sales, Implies $255m to 265M Revenues in FY20
  • IOTS Spark will be introduced in early August at the BlackHat Conference
  • 12 to 15% Revenue Growth in IOT, Currently makes up 42% Sales – Spark improves security protocol as it incorporate Cylance Endpoint Management
  • QNX Licenses adds 17 new design wins in Q1. 13 new Auto Designs wins for Infotainment systems, digital instrument clusters, Digital consolidator cockpits and telematics (Self Driving Cars)
  • Blackberry is a software company focusing on Security, IOT and Autonomous Vehicles. Legacy phone business has been phased out and Company GM’s near 78% today.
  • Sum of the Parts – Cylance trades at 20x sales (Crowd strike 40x), IOTs trades at 5x Sales, plus Net Cash = $14 Price target – Giving NO Valuation to QNX/Autonomous Business.

Bear Case

  • Co’s management tend to disappoint investors frequently with over promising / under delivering.
  • Mis-Conception that the company is still in the phone business.
  • New Blackberry is a Rollup of Software acquisitions.
  • Cylance growth rate has slowed since Blackberry acquisition.
  • Meanwhile competitor, Crowd strike growth rate remains strong.
  • Institutional investors have given up. Company has been left for dead.
  • Risk that investors will never see a Return on Investment.
  • Its Blackberry – Company should refresh image and drop Blackberry name.