BlackBerry soars on sale of Cylance

Shares of BlackBerry (BlackBerry Stock Quote, Chart, News, Analysts Financials TSX:BB) are leading the TSX this morning as the company announced it had found a buyer for its troubled Cylance unit.

The Waterloo-based company announced that Arctic Wolf, a Minnesota-based AI company would acquire Cylance for $160-million and 5.5-million shares of Arctic Wolf.

“I am incredibly excited to partner with Arctic Wolf through this agreement,” BlackBerry CEO John Giamatteo said. “We see this transaction as a win-win for our shareholders and all other stakeholders. Our customers will realize the benefits of continuity of service and the expertise that a global cybersecurity leader like Arctic Wolf provides. Arctic Wolf benefits by adding Cylance’s endpoint security solutions to its native platform. Finally, as Arctic Wolf leverages its scale to build upon and grow the Cylance business, BlackBerry will benefit as a reseller of the portfolio to our large government customers and as a shareholder of the company.”

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, Giamatteo said offloading Cylance was a priority.

“Well, as you heard, the common theme is a year ago, revenue was declining,” he said. “We were unprofitable, and we were burning cash. 12 months ago, if we were sitting here, that was the BlackBerry story. A year later, revenue is now kind of stabilized. Some pockets of it have grown. We’re on the verge of breaking through to our profitability standpoint. And in Q4, we’re confident we’ll be at a cash flow positive. So, in one year, we kind of stabilized the company in a lot of ways. As we go into that next year, growth acceleration by pivoting our investment on areas where we absolutely think we can grow, continuing to get leverage out of our business model and drive more profitability. And, we think by taking care of our Cylance drag, that’ll be, in one fell swoop, that’ll take us to another level where, to Tim’s point, a year ago, we were not thinking about what would we do with cash. We were just hoping to get to, like, cash flow breakeven.”

At press time, shares of BlackBerry on the TSX were up 12.3% to $4.30.