A few months ago, BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) made headlines by entering a partnership with the Federal Government to test self-driving cars. The company will invest up to $100 million into a new hub dedicated to testing the viability of the new technology.
BlackBerry shareholders rejoiced the news. Not only do self-driving cars have the potential to be a huge market, but it was yet another indication that the company is fully embracing software after losing millions in hardware over the last few years. This is the kind of project that can really make a difference.
Remember, BlackBerry is already a relatively big player in automobile software. The company has contracts with many major automakers to put its QNX software into in-dash entertainment systems. Bulls see this existing relationship as a way for BlackBerry to get its foot in the door with self-driving software.
But bears disagree. In fact, some of the more vocal bears have even gone a step further and argue that BlackBerry will never be major player in this exciting new market. Here’s why.
Too far behind
BlackBerry’s test vehicle was expected to hit the road sometime in early 2017 when it first announced the project. If a car is currently on the road, it hasn’t been officially announced.
Let’s compare that to other tech titans. Alphabet has been testing a self-driving car since 2009 and has now put these vehicles into four different U.S. cities. Apple’s autonomous car has been a poorly kept secret for a couple of years now. Intel has also launched its own project.
Tesla is also a big player in the self-driving car market. Many consider the company’s Autopilot software to be the most advanced self-driving program on the market today. The internet is filled with videos of Tesla owners setting their Autopilot and driving for miles without putting their hands on the steering wheel.
Let’s not forget about the ride-sharing companies. Both Uber and Lyft are also testing autonomous cars. General Motors is reportedly going to build thousands of self-driving vehicles for Lyft to really accelerate its pilot program. Uber, meanwhile, is in the middle of a big test project in Pittsburgh.
Traditional car manufacturers are also working on their own technology. Ford has announced that it plans to have a fully autonomous car by 2021. BMW has predicted it’ll sell driverless cars in 2021. Toyota has done one better, promising it will deliver autonomous cars to customers by 2020.
There are at least 35 different companies that are collectively throwing billions of dollars annually towards this new technology. That is a lot of attention.
The bottom line
The point is simple. BlackBerry is going up against the titans of the tech world. Can it really compete in such a crowded space? If we can’t predict it with any sort of certainty, then it’s going to be hard to make money from it.
I’m reminded of a Warren Buffett story about the 1910s: it was obvious cars were going to be the big new thing. What wasn’t so simple was which car manufacturer was going to dominate this market.
Buffett suggested investors look at it another way. Instead of trying to predict the winners, try to predict the losers. Even in 1910, the loser was obvious. The solution was to short horses.
Perhaps investors trying to invest in the self-driving car market should take a similar attitude. Instead of buying BlackBerry as a way to play the sector, look elsewhere for a better opportunity.
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Fool contributor Nelson Smith owns shares of BlackBerry. David Gardner owns shares of Alphabet (A shares), Alphabet (C shares), Apple, Ford, and Tesla. Tom Gardner owns shares of Alphabet (A shares), Alphabet (C shares), and Tesla. The Motley Fool owns shares of Alphabet (A shares), Alphabet (C shares), Apple, Ford, and Tesla and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Tesla is a recommendation of Stock Advisor Canada.