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Contrarian Investors: Steer Clear of BlackBerry Ltd.

Many contrarian investors are considering BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) as a rebound play on the company’s potential turnaround story. The company failed as a hardware business because the management team lacked an open mind and was destroyed by its competition. The phone business was generations behind its peers, and this led to a gigantic decline into the abyss. As the company shifts its focus from hardware to software, can it really turn things around this year?

BlackBerry’s revenues continue to decline, and it looks like revenue growth for this year may be wishful thinking. There are several promising projects that could be catalysts for a turnaround, but I’m not so confident the company will be able to deliver what is expected of it in the long run.

QNX is one of the projects that could put the company back on the map. QNX is an operating system that was used in the BB10 mobile device, which launched in 2013. QNX is considered one of the most secure and stable operating systems in the world. Going forward, BlackBerry is looking to embed the operating system in autonomous cars, which I believe is a gigantic opportunity for growth. BlackBerry believes QNX is the answer to self-driving cars that the automotive industry has been looking for.

While QNX and the opportunity to capture a chunk of the autonomous car industry sounds promising, I believe BlackBerry may be late to the party once again. BlackBerry has no moat with QNX, and many other software companies, like Apple Inc., have already been working on autonomous-car operating systems. There’s no question that Apple will be the preferred OS, especially considering BlackBerry’s poor reputation of failed products.

Although QNX is incredibly secure, BlackBerry will not hesitate to hand over access to a users’ secured data to the government. BlackBerry CEO John Chen believes there was “nothing wrong” with simply handing over a users’ secure data if asked. This weak privacy stance that BlackBerry has is reason enough to pass on the QNX operating system, even if it is considered the most secure one on the market. Whistleblower Edward Snowden stated that BlackBerry will be “erased from history” because of its weak position on privacy.

I don’t think the company will be going bankrupt anytime soon, but I do believe the company will continue to bleed cash for the next few years. Sure, there are plenty of software opportunities to grow, but it’s a coin toss as to whether or not the project will succeed. The company has no moat, and it’s very likely that competition will steal BlackBerry’s piece of the pie once again.

If you’re a contrarian investor, I would look elsewhere. The company is a speculative gamble at current levels, and you could end up losing your shirt.

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Fool contributor Joey Frenette has no position in any stocks mentioned. David Gardner owns shares of Apple. The Motley Fool owns shares of Apple and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple.

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