The jury is still out on BlackBerry, says this portfolio manager

Fast forward to the present and while the company has done an admirable job over the past five years in extricating itself from the handset-maker business and rebranding itself as a security and software firm, investors are still a little in the dark on what this company is all about.

That’s a problem, says Paul Harris of Harris Douglas Asset Management, who argues that for CEO John Chen’s next act, we need to see where and how BlackBerry will generate its revenue.

“I think the issue with BlackBerry is that the CEO has done a very good job in moving the company in a different direction. And now the execution part is that they’re in a new area and they have to grow that,” said Harris, partner and portfolio manager at Harris Douglas, to BNN Bloomberg on Wednesday. “They’ve done a lot of deals but you don’t get the value of those deals when they talk about them, they’re sort of longer term down the road. Now we just have to see if these deals come to fruition and you get the benefit of those deals.”

BlackBerry biggest splurge was in November when it paid US$1.4 billion for Irvine, California-based cybersecurity firm Cylance, At the time, Chen spoke of how the move would help to refine BlackBerry’s focus.

“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,” Chen said. “Those are the things that we’ve been doing and Cylance fit that completely, 100 per cent. So this is exciting for us.”

But the market greeted the news with next to no reaction, as BB’s share price continued to slip over the back half of 2018. Like many names in the tech sector, BlackBerry has seen a nice uptick to start 2019 and is now trading up 15.4 per cent for the year so far.

“On the security side, that’s why people have owned them before, so I think that that’s still there, but there are always going to be people competing with you on security all of the time, since that’s one of the biggest issues that we’re facing today,” says Harris.

“The hard part about analyzing the company is that when you look all of their stuff, you’re wondering, ‘I know that this is going to make you money, but when and how much money is it going to make you?’ It’s really hard to put all of those things together,” he says.

“I think that’s the difficult part of the story. Now [Chen] has to execute,” he says.