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BlackBerry Ltd.: Stay the Course

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) is perhaps one of the most emotional investments on the market today. Long-time investors recall the company as the architect of the modern smartphone, but those investors were also burned as BlackBerry came crashing down in value due to lacklustre products and failure to innovate.

As BlackBerry continued to lose money and market share, BlackBerry developed a reputation for releasing products that were tagged as being “too little, too late” by investors and analysts. There was the BlackBerry tablet, which was half-baked at launch and required a year or more in development to get native email. There was also BlackBerry’s next-gen operating system BB10 which launched to much fanfare and reviews but failed to garner the widespread support of application developers and users.

Too little, too late.

As we all know, that was the old BlackBerry. The company was lacking in focus, had no set targets, and was stuck halfway between being a consumer-focused and software-heavy company, with enterprise sadly lacking in the middle. That wasn’t too long ago either; just over three years ago, BlackBerry was still pushing BB10 development and making new hardware devices.

BlackBerry has come a long way in a short period of time

In just over three years, CEO John Chen has taken BlackBerry from the brink of collapse to establishing multiple solid revenue streams that will provide growth for years, and make the difficult decisions needed to push the company back to profitability.

Shuttering the hardware division was perhaps one of the most controversial yet correct decisions BlackBerry has made in the past few years. The fact that BlackBerry selected third-party partners to build and design new devices bearing the BlackBerry name was a smart move.

In terms of new solutions, BlackBerry’s Radar asset-tracking system is a unique solution for a common problem in the industry, leveraging the strength of BlackBerry’s network and security. From a revenue standpoint, Radar comes with an upfront cost of the unit, and then the company charges subscribers the much-coveted monthly subscription cost.

In a similar vein, BlackBerry’s close work with Ford Motor Company on integrating QNX further into vehicles beyond being a simple infotainment system is both encouraging and promising and will likely lead to similar deals with any of the other +50 automotive manufacturers already using QNX in vehicles.

Finally, there’s enterprise and security. Chen instilled a belief back into the company for those two core areas, which were sadly lacking prior to his arrival. Enterprise clients continue to creep upwards, and, despite being a de-facto expert on security, BlackBerry never really monetized that expertise through a consulting arm until the past few years.

Investor confidence is waning

Investor confidence has swayed in recent weeks. Some have noted that the company’s five-year turnaround is taking too long. Those with this concern became particularly vocal in the weeks following BlackBerry’s quarterly update earlier this summer, when the company missed earnings estimates due to a sales decline.

Some investors have been critical of BlackBerry’s R&D initiatives relating to the automotive segment, stating that they are taking too long to show results. BlackBerry’s stock even took a hit, dropping over 20% in the period since the last quarterly update.

Is BlackBerry still a good investment?

The main point that investors need to realize when it comes to BlackBerry is that today’s BlackBerry is a very different company than it was several years ago. BlackBerry’s business and revenue streams are vastly different too, which makes earnings comparisons with that prior era almost comical.

Even BlackBerry’s drop in share price over the past few months is minimized when considering that, year to date, the stock is still up over 16%.

In my opinion, BlackBerry is a great investment opportunity for long-term growth. Many of BlackBerry’s current projects are R&D-type projects for which there are limited or no competitors on the market. QNX is set to become a leading player in the emerging autonomous market while retaining a commanding lead in market share of the infotainment market. Furthermore, the agreement with Ford is on a deeper level than most investors understand, and it will lead to increased market share and additional deals with other automotive manufacturers.

36-Year Old CEO Bets Over $300 Million on 1 Stock

Iain Butler, Lead Adviser of Stock Advisor Canada, recommended this little tech darling to thousands of loyal members last March... and those that followed his advice are up 127.7% (they’ve already made 2X their money!).

Not to mention this tiny Eastern Ontario company has already been recommended by both Motley Fool co-founders, David and Tom Gardner, because of its amazing similarity to an “early stage” Amazon.

Find out why Tom Gardner was recently on BNN’s Money Talk raving about this company, and how you can read all about it inside Stock Advisor Canada. Click here to unlock all the details about his Canadian rule breaker!

 

Fool contributor Demetris Afxentiou owns shares of Ford.  David Gardner owns shares of Ford. The Motley Fool owns shares of Ford.

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