BlackBerry could have a bright future again, this investor says

What’s in store for BlackBerry (BlackBerry Stock Quote, Chart, News TSX:BB) now that it’s got a new deal with Amazon Web Services? Probably more volatility in the stock, says portfolio manager Michael Sprung, who nonetheless says the future for the connected car is a wide open road.

Call it a feel-good story to wrap up 2020, last week, BlackBerry announced a multi-year agreement with AWS to develop and market BlackBerry’s Intelligent Vehicle Data Program, or IVY, used gather information from connected car sensors for a range of potential applications. The stock, which had seen better days of late and was in the red for the year, vaulted ahead as much as 19 per cent on the news.

The aim is for cloud-connected vehicles to be able to monitor driver behaviour so as to personalize and monetize in-vehicle applications, a field that car-maker Tesla has been widely praised for pioneering. In an interesting twist, BlackBerry’s IVY is looking to become the standard platform for in-car apps much like the iPhone and Android platforms — which together yanked BlackBerry from its perch atop the mobile handset market over a decade ago — currently do for smartphones.

“BlackBerry IVY will enable automakers to compress the timeline to build, deploy, and monetize new in-vehicle applications and connected services across multiple vehicle brands and models. Instead of investing in one-off solutions that conform to the unique engineering of different vehicle models (as they do today), automakers using BlackBerry IVY will be able to leverage different types of data as common building blocks for new services that could work across a range of models,” said BlackBerry and Amazon Web Services in a statement on December 1.

Over the past few years, BlackBerry managed a dramatic turnaround from erstwhile phone maker to software and security specialist, with the connected car being one of its prime concentrations. The company’s QNX operating system has found its way into over 175 million cars currently on the road, according to a BlackBerry statement earlier this year, with the company promoting the security of its products as a key advantage.

BlackBerry CEO John Chen said data and connectivity are leading to innovation in the auto industry.

“BlackBerry and AWS share a common vision to provide automakers and developers with better insights so that they can deliver new services to consumers,” said Chen in a press release. “This software platform promises to bring an era of invention to the in-vehicle experience and help create new applications, services, and opportunities without compromising safety, security, or customer privacy. We are pleased to expand our relationship with AWS to execute this vision and deliver BlackBerry IVY.”

The news comes as welcome respite for BlackBerry shareholders who have seen over the last two or so years the market lose interest in the company’s recovery, even as the company has showed progress in terms of revenue growth.

In its last reported quarter, announced in late September, BlackBerry posted revenue of $259 million compared to $244 million a year earlier and non-GAAP EPS of $0.11 per share. Analysts had been calling for revenue of $239.7 million and EPS of $0.02 per share. (All figures in US dollars.)

Sprung said the lift in BlackBerry’s share price should leave investors thinking of potentially taking some profits.

“BlackBerry has had quite a run since they announced this deal with Amazon Web Services and you know they are certainly participating with their technology and the development of autonomous cars and and software for automobiles and so on,” said Sprung, who is president of Sprung Investment Management, and spoke to BNN Bloomberg on Friday.

“But we’ve seen a sharp spike up lately and to my way of thinking, perhaps a lot of people were attracted by the news and they piled into the stock. I think it may be a little bit ahead of itself right now,” he said.

“If you’re a trader, I guess I’d be tempted to take some profit at this point. If you’re a longer term investor, this could develop over the years, but I think you’re going to see a not entirely smooth path on the way up. But they are certainly re-establishing themselves as a prominent software provider, and it’s a good news to see that from a Canadian perspective. I’m sure the major shareholders are quite happy at this point in time,” Sprung said.

BlackBerry’s IVY, which the company said would be available in cars from the production model year 2023, could be the gateway to a market beyond in-vehicle app purchases, too, says Sprung.

“I think also from the insurers point of view, they’re probably going to offer more and more incentives to drivers that allow their activities to be tracked a little bit more. And that could be a pretty big market,” Sprung said.