Could This Be a Game-Changer for BlackBerry Ltd. Stock?

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) stock came back strongly on new partnership announcements. But are they enough for a long-term turnaround?

| More on:

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) stock surged ~9% on Sept. 20 after it signed a partnership agreement with an auto supplier, Delphi Automotive Plc, for a software operating system for self-driving cars.

According to media reports, Delphi already has developed a turnkey self-driving system called CSLP which it plans to begin selling to automakers and other transportation providers in 2019.

For this project, BlackBerry’s QNX would provide an operating system that was already certified to high levels of safety for Delphi’s CSLP system, which uses software developed by Delphi’s Ottomatika unit.

“You have to have all these pieces together, otherwise what you have is a demo,” Glen De Vos, Delphi’s chief technology officer, was cited as saying in media reports.

Delphi is a high-technology company that develops connectivity solutions for the automotive and transportation sectors. Headquartered in Gillingham, U.K., Delphi operates technical centres, manufacturing sites, and customer support services in 46 countries.

Why were investors so excited?

Investors were so excited about this partnership that they sent BlackBerry shares ~9% higher to end the day at $12.15.

BlackBerry has been counting on QNX software and services business for long-term growth after its revenue from the smartphone segment disappeared.

The QNX operating system, which powers automobiles’ infotainment systems, is forecast to be the second-largest component of the firm’s software sales, after its enterprise mobility management business.

Before Delphi’s announcement, investors were losing faith on the widespread use of QNX operating system due to intense competition for market share. Most large vehicle manufacturers are developing their own self-driving systems.

BlackBerry’s shares had lost about 30% before Sept. 20, since reaching this year’s high of $15.82 in June.

While BlackBerry saw QNX as a long-term growth driver, with opportunities in areas such as the Internet of Things, many analysts now see some significant competition from other tech giants.

Goldman Sachs issued a “sell” recommendation on BlackBerry stock last month, citing competition from Citrix Systems, Inc., Microsoft Corp., and VMWare, Inc., which bundle those products into broader business software offerings.

But it seems BlackBerry’s CEO John Chen has a few things up in his sleeve to generate some momentum.

In a separate announcement on Sept. 20, BlackBerry said it has partnered with a Toronto-based fleet and asset management company to sell its asset-tracking service.

The Ontario-based Fleet Complete, which serves 250,000 subscribers and 10,000 businesses around the world, will sell BlackBerry Radar technology alongside its existing services in a package that executives described as “unbeatable” in a media call.

Investor takeaway

There is no doubt that these partnerships are very positive for BlackBerry’s stock and show that the management has been working hard to make its turnaround strategy work.

Still, I see significant risks in the QNX market, which is still in its nascent stage and likely to face a stiff competition.

BlackBerry’s trading pattern suggests it’s a highly speculative play. For long-term investors, I reiterate my wait-and-see approach until we have some solid signs of a turnaround.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Haris Anwar has no position in any stocks mentioned.

More on Tech Stocks