Why BlackBerry is walking away from Cylance

It was a splashy-techy acquisition when the company needed it, but BlackBerry (BlackBerry Stock Quote, Chart, News, Analysts, Financials TSX:BB) is now walking away from Cylance.

Cylance, the California-based antivirus and malware firm that was acquired by BlackBerry in February of 2019 for $1.4-billion, soon ended up in the Canadian company’s doghouse, described by one analyst as a “a major drain on BlackBerry’s cybersecurity business”.

On a conference call around the RBC Global Technology, Internet, Media and Telecommunications Conference on November 19, new CEO John Giamatteo told RBC analyst Paul Treiber why Cylance is on the outs.

“One of the things we thought was important on Investor Day was to break out the cyber business unit into the three components — or really two components, our secure communications components, which makes up of UEM, AtHoc, and Secusmart, and the Cylance component,” he said. “And the Cylance component has absolutely been a bit of a financial drag for us over the last few years. Primarily, when we acquired the company back in 2019, we were market leader in endpoint protection, AI/ML endpoint protection capability in 2019 when we acquired the company. The market in 2020 timeframe took a, like, a 180 degree turn towards EDR. Endpoint protection was nice, but endpoint detection and response, a comprehensive EDR platform, was really where the market kind of shifted to. And you’ve seen the strong EDR players have benefited from that, and the endpoint players were — like us, were stuck trying to catch up. So, we were building, investing heavily to try to build out an EDR capability, which takes a long time. It gets you to a point where you’re always trying to catch your competitor.”

Giamatteo says Cylance might be the right fit for someone, just not BlackBerry at this time.

“It requires a significant amount of investment,” he said. “You need to get to scale to really get the payback on that investment. And as we’ve looked at, where we should be allocating capital going forward, I think Tim and I, as kind of the new leadership team said, this is probably an area where we need to pull back from. We need to streamline our costs further. It’s a consolidating marketplace. There’s a lot of different opportunities that could come our way as the market tends to consolidate in the endpoint protection. So, minimizing the cash burn. You take the Cylance business out, the rest of the cyber business, it’s stable. It’s profitable. It generates cash. So, I will tell you, Tim and I have conviction about taking care of the Cylance problem one way or the other over the course of the next year.”