You may have been staying away from BlackBerry (BlackBerry Stock Quote, Chart, News TSX:BB) recently with the tech company’s future still in doubt and the stock at multi-year lows, but you’d probably miss out on a big buyout.
That’s the opinion of investment manager James Hodgins who thinks that any of a number of global software companies will likely be knocking on BlackBerry’s door sometime soon.
BlackBerry shares got a boost earlier this month as the market reacted to the company’s latest quarterly earnings. BlackBerry beat analysts’ estimates for both profit and revenue in its fiscal third quarter ended November 30, posting revenue of $267 million, up from $226 million a year earlier, and a loss of $32 million compared to a profit of $59 million last year.
On an adjusted basis, BlackBerry’s top line of $280 million was better than the consensus estimate of $276 million while the company earned $0.03 per share excluding one-time items compared to the Street’s estimate of $0.02 per share. (All figures in US dollars.)
Notably, BlackBerry’s software and services revenue saw a nice jump of 21 per cent year-over-year to $262 million. CEO John Chen said the company’s cybersecurity wing, Cylance, which reported revenue of $40 million for the quarter, would see stronger revenue growth in the upcoming calendar year.
“BlackBerry achieved sequential growth in revenue across all of our software businesses while generating healthy non-GAAP profitability and free cash flow as we continue to invest in our future,” said John Chen in a press release. “I am pleased with our progress. Our pipeline is growing as we deliver against our product roadmap and execute on our go-to-market expansion.”
BlackBerry’s share price jumped about ten per cent on the quarterly results, a welcome development for a stock which has been mired in a multi-year slump as investors grow impatient with the company’s turnaround from hardware to software and security services.
That transformation has borne fruit in the form of a highly-coveted QNX operating system now serving as the operating system in many of today’s connected cars, an asset that should make BlackBerry an attractive take-out target, says Hodgins.
“I think BlackBerry is going to be sold, relatively soon. I think that was the idea all along when Mr. Chen took over the company,” said Hodgins, president and CIO at Curvature Hedge Strategies, who spoke to BNN Bloomberg on Monday.
“They certainly have been winning tonnes of business in the automotive operating system business and that’s definitely a growth area for them,” he said. “It’s not a cheap stock but to a buyer, someone like an Oracle, a big, global software company that wants to get foothold in that automotive operating system business, BlackBerry would make a lot of sense.”
As to the premium BlackBerry shareholders might receive from a buyout, Hodgins thinks it could be lucrative.
“Who knows? I think likely, given how expensive the tech market is here, another company could come in and use their shares pretty easily and pay a pretty decent premium for BlackBerry,” he said.