After limping through the first half of 2015, BlackBerry Limited (NASDAQ:BBRY) has finally found some strength. Beleaguered BBRY stock ended the year with a solid comeback owing to its “Android” OS-based phone’s reasonable reception, better-than-expected third-quarter results, and a new foray into the world of smartcars. Here’s the simple reason why I believe 2016 will be a much bigger and better year for BlackBerry stock.
BlackBerry’s Journey from Smartphones to Smartcars
Under the company’s new CEO, John Chen, something interesting has been happening at BlackBerry. Once considered the bellwether of mobile phone companies, BlackBerry lost all of its glory in a matter of a few years, as the smartphone revolution took over the world. But Chen decided to remodel BlackBerry’s business from a strictly hardware-based company into a hardware-software hybrid company.
BlackBerry is utilizing the strength of its software to target a newly emerging market of smartcars, where almost all the big technology companies, including Apple Inc. (NASDAQ:AAPL) and Alphabet Inc (NASDAQ:GOOG), are investing largely in the hardware.
One big news headline is out this week that Ford Motor Company (NYSE:F) is going to partner with BlackBerry to integrate smartphone apps into cars. Ford is going to lend its “Smart Device Link” (SDL) technology to BlackBerry’s “QNX” software, which currently powers infotainment car systems for almost all the major automakers, including Mercedes, Audi, BMW, Hyundai, Ford, Toyota, and Honda. (Source: “QNX Collaborates With Ford to Drive Industry Standard for Integrating Smartphone Apps Into Cars,” Yahoo! Finance, January 4, 2016.)
Bear in mind that previously, QNX only allowed external device connectivity for “iOS” and Android devices. Now, QNX will itself be an application platform that will connect everything in the car, allowing voice controls and sharing.
The news has come following BlackBerry’s earlier announcement to partner with Luxoft Holding to develop a semi-autonomous advanced driver assistant system (ADAS)—or simply put, self-driving car technology that will assist drivers in navigation and direction.
BlackBerry’s move comes ahead of the tech world’s growing interest in machine-to-machine connectivity. The dawn of machine-to-machine communications is lending favor to the building of new ecosystems that will connect all of our daily-use machines and devices, starting from our cars and kitchen appliances to home security systems, smartphones, entertainment systems, and more.
This revolutionary ecosystem is dubbed the “Internet of Things” (IoT) and if you haven’t heard of it already, you’ve been missing out on something huge, while BlackBerry has been quietly expanding its stronghold in this growing niche.
Now, a lot has been said lately about BlackBerry’s new phone, the “BlackBerry Priv,” which may not have been a major hit like the “iPhone,” but has received better-than-expected demand. Nonetheless, I’m more than optimistic about the software side of BlackBerry, which might soon become its dominant business segment.
The software side of BlackBerry’s business, which made a negligible portion of its revenue base only five years ago, has become a significant part of its business. It is also profitable, unlike the hardware side of its business, which has seen a perpetual decline since the rise of Apple. (Source: “How Has BlackBerry’s Revenue Composition Changed In The Last 5 Years?” Trefis, January 5, 2016.)
The Bottom Line on BBRY Stock
This year is particularly looking good for BBRY stock, as the company’s CEO promises to turnaround BlackBerry’s hardware business and return it to profitability. Meanwhile, the company is also stepping up its game on the software side. Investors must look for these new developments in 2016.
BlackBerry stock could greatly disappoint the bears this year.