BlackBerry (BlackBerry Stock Quote, Chart: TSX, NYSE:BB) is making news with its largest acquisition ever, a $1.4-billion deal for cybersecurity company Cylance.
The major purchase underscores a couple of notables about BB, says Scotia Wealth’s Elliott Fishman: first, today’s BlackBerry has little to do with the industry-leading handset maker of years gone by and, second, at C$11 per share, BB is looking like a real bargain.
Last Friday, BlackBerry announced an agreement to acquire Irvine, California-based Cylance, a privately-held company with 900 employees and 3,500 enterprise clients, 100 of whom are Fortune 500 companies. CEO of BlackBerry John Chen said that buying Cylance —which will remain a separate entity within BlackBerry— fits in with BB’s growth objectives.
“There are a couple of trends in the new generation of IoT: one is that everything wants to talk to each other and the other is security and privacy, especially the latter one is now of paramount importance.” said Chen to BNN Bloomberg recently. “Those are the things that we’ve been doing and Cylance fits that completely, 100 per cent.”
So far, the market has responded with a minor uptick in BlackBerry’s share price which has been falling far much of 2018. After essentially doubling in value during the previous year, BB hit a high of C$18.14 by January 9 of 2018, only to tumble to a low of C$11.35 by October 29. The stock is up almost two per cent to C$12.03 in early trading on Monday.
Fishman, Director of US and International Trading at Scotia Wealth, says that putting a valuation on the new BlackBerry is not easy, since the company bears little resemblance to its former self.
“I don’t really know what to do with BlackBerry,” says Fishman to BNN Bloomberg. “What they do do now is great. They’ve found their niche and they’re staying in it and the company and the stock have acted quite well. In here, it’s cheap. If they’re going to throw around a billion dollars and it’s an $11 stock then you can sign me up for that.”
BlackBerry last reported its quarterly earnings on September 28, where it beat analysts’ expectations with a profit of $43 million, representing adjusted earnings of $0.04 per share compared to the consensus $0.01 per share. The company saw its revenue fall 12 per cent year-over-year to $210 million, with much of the blame falling on loss of service-access fees from its mobile operating system software. (All figures in US dollars unless noted otherwise.)
BlackBerry’s focus is now turned to its autonomous vehicle software, QNX, along with its Spark communications platform, and Fishman says that the company’s transformation has been so complete that it likely warranted a change in name.
“They almost should have changed the name because it really isn’t the same as what it was,” he says. “It’s probably hindering them a little bit because the company is totally different now.”