BlackBerry is a prime acquisition target, this fund manager says

BlackBerry. Acquisition target?

It’s been and up and down year so far for BlackBerry (BlackBerry Stock Quote, Chart TSX:BB) but with the company’s multi-year turnaround now behind it, what does the future hold for the Canadian tech name?

If investors are lucky, hopefully a buyout, says Rob Lauzon of Middlefield Capital, who argues that BlackBerry is more of a niche idea now.

“Really, they’re security software for autos now. They’ve got a great niche and they’ve done a great job,” says Lauzon, managing director and deputy chief investment officer for Middlefield, to BNN Bloomberg on Friday.

“I think the play here is that we saw an auto sensor company get taken out [recently] and so if you’re playing the development of the electric vehicle, of autonomous vehicles and the security that you’re going to need once 5G comes and you’re going to have car-to-car discussions through technology, you need security,” he says. “So BlackBerry could be a takeout target,” Lauzon says.

Ahead of BlackBerry’s first quarter fiscal 2020 due later this month, the company has performed well over the past year, impressing with the acquisition of cybersecurity firm Cylance, growing its revenue and returning to profitability, all the while putting the finishing touches on its remake from a hardware handset company to a software and security firm.

“I am pleased to note that BlackBerry is recognized as a $1 billion plus revenue company in security software. The combination of BlackBerry Cylance’s lightweight AI and machine learning cybersecurity capabilities with BlackBerry Spark, our secure communications platform, will make our endpoint management and embedded software products stronger and more essential for enterprises to generate value from the Internet of Things,” said John Chen in March.

BlackBerry acquisition target on security portfolio

Lauzon says that exposure to the automobile tech space could be had through BlackBerry but that investors might also want to check out ON Semiconductor as another option.

“I don’t buy stocks on takeouts but that’s the reason to own BlackBerry,” he says. “It’s to capture some of their growth plus you have that in your back pocket that they might get taken out.”

“If you’re looking for something that’s a component through technology to cars, maybe an ON Semiconductor, which makes the sensors for robocabs and autonomous vehicles, so ON Semiconductor could be an alternative to BlackBerry,” he says.

BlackBerry acquisition target or patent troll?

One expert says BlackBerry may actually have a brighter future as a patent troll. According to Envision IP’s Dan Lonkevich, who noted that his colleague Maulin Shah had noted the company’s strong stable of patents.

“Maulin Shah, the managing attorney for Envision IP said in an email that BlackBerry has 8,168, active, in-force U.S. patents in its portfolio, with an average remaining term of 9.5 years. BlackBerry had a general upward trend in year over year patent application filings from 2004-2012. Its patent filings peaked, however, in 2012 with 1,578 applications filed that year. The company’s filing rate has declined year over year ever since, with 968 in 2013, and only 438 in 2014. In 2015, BlackBerry published only 287 filings, though the number may increase as patent applications typically publish 18 months after their earliest effective filing date.”

So far in 2019, BlackBerry’s share price is up nine per cent, while over the past 12 months the stock is down 32 per cent.