You may be thinking that the BlackBerry (BlackBerry Stock Quote, Chart, News TSX:BB) story is one of reinvention, a rising-from-the-ashes tale where the former mobile phone company and Canadian icon emerges in the new decade to make its mark as a software and security notable.
And basically that is the idea —only don’t be surprised if the final chapter sees BB sold off to another business.
So says portfolio manager Chris Blumas who argues that investors searching for a lucrative software play should look elsewhere.
“We do not own Blackberry. I followed this one for a number of years, almost my whole career, and this is a different business than it used to be,” said Blumas, vice president of GlobeInvest Capital Management, who appeared on BNN Bloomberg Wednesday.
“They’ve transitioned and they've done two turnarounds and now they're with [CEO] John Chen and they're trying to transition into more of a software type business,” he said.
“I think if you ask, how does this play out and what's the end game for Blackberry, I think they're trying to turn things around far enough and then exit through an acquisition. I think they're hoping somebody will buy them.”
“This isn't something that interests me at all and I would steer clear of this one and just watch from the sidelines,” Blumas said. “There are much better software companies to invest in and much better investment opportunities.”
BlackBerry the phone brand rather than the company appears to finally be ending its run, as announced earlier this month by Chinese telecom company TCL which had been making the handsets in recent years and now says that its partnership on the iconic phone is finished as of this year and the company will no longer be supporting models as of August 31 of this year.
And while it’s been years since BlackBerry the company distanced itself from the handset business and started on the long road to redemption as a connected tech and security company, the turnaround has been a slower one than many an investor might have liked to see.
Optimism seemingly hit its high point back in early 2018 but BlackBerry’s share price has since tumbled, losing 33 per cent over 2018 and a further 14 per cent last year. So far in 2020, BB is down 12 per cent.
Notwithstanding the gloomy chart, BlackBerry performed admirably in its most recent quarter, delivered in December. Revenue for BB’s third quarter climbed 23 per cent year-over-year to $280 million on an adjusted basis and beat analysts’ consensus estimate of $276 million. Earnings of $0.03 per share were also a surprise to the plus side compared to the Street’s expectation of $0.02 per share. (All figures in US dollars.)
The Q3 results from BlackBerry’s various segments were mixed, however, with adjusted revenue from Internet of Things, which includes its enterprise software and services business, dropped three per cent to $145 million, while its Cylance cybersecurity business rose to $40 million for the quarter.