Everybody loves a good turnaround story.
BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) has been beaten around and left for dead more times in the past several years than I can remember. Analysts have used clichés, such as “circling the drain” and “too little, too late” repeatedly to state their disdain for the stock, which, ultimately, hasn’t boded well for the one-time titan of the technology sector.
Incredibly, BlackBerry presents itself as a unique and intriguing investment opportunity that few investors fail to realize because of their bias towards the company’s prior decisions.
The main issue with BlackBerry, at least in the view of investors, is that the company has too much historical baggage. Investors that lost most of their investment on the stock still feel burned by it and, in some cases, have gone from being evangelists of BlackBerry to becoming some of the harshest critics. A parallel view can be said about many of BlackBerry’s long-time, faithful hardware users; as the company shuttered its hardware division users expressed their disdain.
Here’s a refreshing, new take on BlackBerry
To really assess BlackBerry as an investment, we first need to (or at least try to) forget the past BlackBerry, as this is a new company that is only linked to its prior incarnation by name.
BlackBerry is no longer focusing on hardware directly; rather, it is a company that is proceeding on several fronts, all of which hold promise.
On the Internet of Things (IoT) front, BlackBerry’s recently released radar product is an intriguing, yet simple solution to address the long-standing issue of asset tracking on a global scale. The product is sound, provides a recurring revenue stream for the company, and is likely to be a success once sales pick up, which is a key issue the company highlighted in the most recent quarter.
In the most recent quarter, CEO John Chen commented on BlackBerry’s lower-than-expected sales figures, hinting that the company would be expanding its sales force to sell the new array of products on offer.
Another intriguing and new area that BlackBerry has branched into is the automotive sector. BlackBerry’s QNX operating system is already in over 50 million vehicle infotainment systems, and BlackBerry is actively working on getting QNX integrated deeper into more automotive systems. BlackBerry signed a deal with Ford Motor Co. last year and alluded to the fact that talks with other manufacturers are ongoing.
Perhaps one of the most promising initiatives that BlackBerry has grown into over the past two years relates to consulting. BlackBerry has long been viewed as an authority in the realm of cybersecurity, yet the company has never really offered those services as a separate revenue stream until recently.
What about results?
In the most recent quarter, BlackBerry reported non-GAAP revenue of US$244 million, and GAAP revenue came in at US$235 million. BlackBerry boasted more than 3,000 enterprise orders in the quarter with 79% of software revenue recurring.
In terms of cash, cash equivalents, and long-term investments, BlackBerry finished the quarter at US$2.6 billion, reflecting an increase of US$855 million. This is telling, considering the company has a market cap of US$4.75 billion.
Investors often view historical results as a measure of comparison with current results to gauge performance, and this is where much of the criticism of BlackBerry comes from, which is, in my opinion, unfair.
Looking at results from the same quarter a year ago, BlackBerry had US$152 million in revenue from the handheld division and US$106 million in system-access fees. Turning to the most recent quarter, BlackBerry realized just US$37 million and US$38 million, respectively, and this is where investors need to be cognizant of just how much the company has changed.
In other words, the results are more about a realignment than a “drop” over the last quarter.
In my opinion, BlackBerry is a very different company today and may be a viable investment option for long-term investors that can tolerate short-term risk.
