BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) is trading close to the 52-week high after a remarkable rally over the past month that pushed its stock value higher about 25%.
But despite these tremendous gains, it has not been a smooth journey for this troubled technology company, which is struggling to find new sources of revenue after the collapse of its smartphone business.
The latest negative news that investors have absorbed during the past few weeks was the departure of its two senior executives at the patent licensing division. Victor Schubert, who was a licensing director, left the company this month, followed by Mark Kokes, who was heading the company’s overall patent strategy.
After the second departure on October 16, BlackBerry stock sank about 4% at one point, showing investors’ nervousness on the turnaround strategy of the CEO John Chen when his lieutenants are deserting him.
Will the loss of two top executives negatively impact the company’s drive to monetize its intellectual property?
Chen was quick to allay these fears. He told CNBC in an interview that the company’s strategy for generating licensing revenue from its patent portfolio remains on track.
“I’m confident. I’m on top of this,” Chen said. “All our IP [intellectual property] licensing are managed by myself, the CFO, our legal counsel, and the president of the group.”
BlackBerry is trying to get companies to pay licensing fees for the use of its 40,000 global patents, such as networking infrastructure, automotive subsystems, and wireless communications.
Should you be concerned?
There is no doubt that BlackBerry’s shares are riding on a positive momentum created by the strong second-quarter earnings and recent partnership deals for its software operating system for self-driving cars. But losing two senior executives at this critical juncture creates a lot of doubt in the minds of long-term investors.
BlackBerry has been counting on its flagship software and services business for long-term growth, especially marketing the security feature of its software when every top company on the planet is beefing up investments on their systems to protect their assets from hackers.
The bottom line
Trading at $14.13, BlackBerry stock has gained 24% in the past month at the time of writing. These gains took its stock price close to the 52-week high of $15.82 it reached in June.
It is going to be a tough ride up for BB stock going forward, as almost all the positive developments have been priced in. Any slight negative development may cause a big swing in the share price.
The big reason that makes BlackBerry shares very sensitive to the negative news is that the company is testing a lot of new things, and investors are not sure how these new revenue-generating ventures will play out.
For example, its QNX operating system, which powers automobiles’ infotainment systems and is forecast to be the second-largest component of the firm’s software sales after its enterprise mobility management business, is still in the early stage of penetration.
Waiting on the sidelines, I think, is a better approach for long-term investors.