The rise and fall of Canadian tech giant BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) may be a distant memory, but for many Canadian investors, it still stings. The tech giant saw its share price balloon to an all-time high of over $230 per share in 2007 before declining to as low as $8.15 this past year. A company that has shifted its focus from being one of the world’s leading smartphone makers to a provider of software solutions for corporations and, more recently, autonomous vehicles, BlackBerry is hoping to continue to ride this wave higher through 2017.
The good news
Since BlackBerry’s 52-week low, the stock has rebounded, nearly doubling to more than $15 this past week on takeover rumours circulating courtesy of analyst Andrew Left from Citron Research. This follows news that BlackBerry has settled a lawsuit via arbitration with Qualcomm, Inc., receiving nearly $1 billion in a settlement payment. This wave of positive news has been welcomed by BlackBerry investors, some of whom have lost a lot of money over the years from having BlackBerry as a portfolio staple, and cheered by many Canadians hoping to once again be proud of one of the (formerly) best Canadian brands.
The not-so-good news
I’m going to point out one piece of news that seems to have slipped through the cracks in recent weeks, but it’s an important consideration for investors buying into the “BlackBerry Buyout” thesis: BlackBerry’s QNX platform has been dropped by the world’s largest automaker Toyota Motor Corp. (NYSE:TM).
BlackBerry’s QNX platform has long been considered one of the world’s safest software platforms, and given the company’s current install base of approximately 60 million vehicles (fully endorsed by Mr. Left, nonetheless), the long runway that BlackBerry is expected to have with the autonomous vehicle revolution and the need for safety with respect to the software systems running in cars is very exciting indeed.
That said, Toyota’s announcement that it’s choosing the Automotive Grade Linux (AGL) system over BlackBerry’s QNX software system as the platform for the 2018 Toyota Camry’s infotainment system is a huge deal. This announcement, which happened on May 31, seems to have been lost in the wave of positive news that has largely overshadowed this key risk factor. BlackBerry’s QNX software isn’t the only game in town, and AGL appears to be getting better at a faster rate.
AGL is a platform that was developed using an open-source development process, allowing Toyota increased flexibility in its platform development with the ability to roll out new software much quicker. In the statement released last week, Toyota’s executive vice president asserted that BlackBerry’s QNX software may be adapting too slowly to changing industry dynamics, stating that the AGL platform should allow Toyota to be better able to continue “providing customers with greater connectivity and new functionalities at a pace that is more consistent with consumer technology.”
Bottom line
BlackBerry continues to look for a profitable, long-term niche. While the autonomous car industry is an exciting (and potentially profitable) sector to be a first-mover in, the reality is that industry fundamentals and the competitive landscape in this industry are changing constantly. Significant risks related to other large automakers pulling out from the QNX platform toward a Linux-based platform are real and may not be fully factored in to the current stock price.
I remain on the sidelines with BlackBerry. In my opinion, the potential upside of the company’s new strategic direction continues to be overshadowed by certain risk factors which have not dissipated.
Stay Foolish, my friends.
