Which way is BlackBerry headed?

Now that it has finally found a buyer for a huge cache of patents, Canadian tech icon BlackBerry (BlackBerry Stock Quote, Charts, News, Analysts, Financials TSX:BB) can move ahead with its plans to dominate in the software, security and connected tech space.

Shares of BlackBerry barely budged on Tuesday’s announcement that a deal had been reached to sell about 32,000 patents and applications to a subsidiary of Dublin, Ireland firm Key Patent Innovations. BlackBerry had a sale lined up a year ago with Catapult IP Innovations but it fell through when Catapult couldn’t secure financing.

“We’re extremely pleased to have executed this agreement with KPI, whose industry-leading expertise and experience positions them well to realize the patent portfolio’s potential and enhance returns for BlackBerry,” said John Chen, Executive Chairman & CEO of BlackBerry, in a press release. 

“This transaction, once complete, will further strengthen our balance sheet while simplifying our business and enabling increased focus on our core IoT and Cybersecurity opportunities,” Chen said.

Earlier this month, BlackBerry published its preliminary fourth quarter and full fiscal 2023 financials, with revenue expected to come in at US$656 million, which would represent a significant drop from last fiscal year’s total of US$718 million.

BlackBerry’s struggles to gain traction with its cybersecurity and connected vehicle platform have weighed on the stock in recent years. Pre-pandemic, BB was at $8 per share but then got boosted to above $15 when it was lumped in with the group of meme stocks like GameStop and AMC which in 2021 became overnight but temporary success stories. BlackBerry then finished 2022 down 63 per cent to $4.41 and has been up and down so far in 2023, with its current share price at just over $5. 

The patent sale will give BlackBerry US$170 million in an upfront payment, followed by a series of earnout payments for up to US$900 million, depending on profits generated by Key Patent Innovations on the assets.

Sector analyst David George-Cosh said so far, the market appears to approve the move as BlackBerry lightens its patent load. 

“They’re selling a significant amount of patents. They still have some IP. They’re getting less money [and] cash upfront compared to the [Catapult] deal, but ultimately, it looks like investors are cheering this particular transaction,” said George-Cosh, speaking on BNN Bloomberg on Tuesday.

George-Cosh said Key Patent Innovations could be buying BlackBerry’s patents for use in litigation. 

“It’s along the strategy of, find someone that’s abusing your intellectual property, sue them and try to get some sort of licensing deal or a deal based out of that particular patent infringement,” he said.