BlackBerry has fallen on hard times.
This company invented the first smartphone, the BlackBerry, in 2004. It was the darling of the technology community at Waterloo University in Waterloo Ontario, Canada. It had the market to itself until Steve Jobs had Apple introduce the iPhone in 2007. Since then it has had a tough haul.
John Chen took over as CEO in November of 2013. Chen had a reputation as a turnaround artist, having successfully turned around the enterprise software business of Sybase, before it was sold to SAP. Fairly quickly, Chen set about transforming BlackBerry from a hardware company to an enterprise software and service company, based in large part on the special features of the QNX operating system.
The QNX software had been designed as a small footprint modular operating system that turned out to be ideal for the Internet of Things and similar systems that were formed using embedded sensors and wireless internet communications.
Security and privacy had long been an important feature of the BlackBerry systems and this has been an emphasis of its software to this day. To strengthen its security offerings, BlackBerry acquired Cylance in 2019. “Cylance’s security solutions provide full spectrum predictive threat prevention and visibility across the enterprise, combatting threats such as malware, ransomware, malicious scripts, weaponized docs, and other attack vectors.”
Financially, BlackBerry has suffered serious erosion in the last few years. Its revenue has fallen from a peak of $19.9 billion in 2011 to $932 million in fiscal 2018 and $904 million in fiscal 2019. Its profits have fallen fron$4.7 billion in 2011 to $283 million in 2018 and $60 million in 2019. A symptom of the erosion of Blackberry’s weak management is the following disaster: “In September 2011, the company’s BlackBerry Internet Service suffered a massive outage, impacting millions of customers for several days. The outage embarrassingly occurred as Apple prepared to launch the iPhone 4S, causing fears of mass defections from the platform.”
In the first quarter of its 2021 fiscal year, beginning on March 1, 2020, Blackberry reported “Total company GAAP revenue for the first quarter of fiscal 2021 was $206 million versus $247 million last year”. “Non-GAAP operating earnings were $3 million versus non-GAAP operating earnings of $5 million last year. Clearly, BlackBerry’s results for this period were negatively impacted by the Pandemic. This was certainly true of its primary revenue from the licensing of QNX to the automotive industry.
Blackberry lists its investment highlights as:
- “Our mission is to enable security from IT to Internet of Things (IoT) in large critical markets
- To provide a “platform for security and management of all endpoint users”
- To provide “the leading software platform for the automotive industry”
- To maintain “an unrivalled, broad, and diverse blue-chip customer base”
- And to transform to a software driven business with demonstrated operating leverage”
It shows the following business statistics:
BlackBerry serves 90% of G20 Governments.
It serves 95% of the top automakers ( with over 175 million cars protected by QNX), 90% of the top global banks, 8 out of 10 top defense and aerospace companies, 8 out of 10 of the largest healthcare companies and the 5 largest media companies.
Blackberry has over 2,000 partners “across our ecosystem.”
This is an impressive list of BlackBerry’s strengths. And yet its stock price has withered in the doldrums, going from a peak of $225.62 in July of 2007, to $8.06 in October 2012, rising again to $16.49 in March 2018, before falling steadily to $6.62 in June 2020. The question is whether its current Mission and the acquisition of Cylance can turn it around after the effects of the pandemic ware off.
Herve Blandin of The Motley Fool has issued a sceptical view of BlackBerry’s prospects following the release of its results for Q1, 2021.
He cautions that in spite of Blackberry’s favourable enterprise to sales ratio of 2.8, “investors should worry about the disappointing performance of the company’s endpoint protection solution (provided by) Cylance.” Cylance’s Q1 2021 revenue decreased to $49 million down 4% year over year. In contrast, the Cloud based endpoint protection specialist CrowdStrike posted year over year revenue growth of 85% in June 2020. Further, a study by MarketsandMarkets forecast “the endpoint protection market should grow at a compound rate of 7.6% by 2024”.
The jury is out on BlackBerry. It will be important to see how it recovers from the pandemic.
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