BlackBerry Stock Could Rise Again Through Cars
BlackBerry Ltd (NASDAQ:BBRY) seems to have found a formula to please investors. The company recently announced it would give up designing and making its own smartphones.
BlackBerry stock reacted well to that decision, at first. In the past few weeks, however, investors have endured a loss of over 11%. Perhaps some investors thought that the termination of BlackBerry phones was premature, given the opening left by the Samsung “Galaxy Note 7” debacle.
The fact remains that if BlackBerry were to continue to compete all by itself as a smartphone-maker, this strategy would have led to collapse. Certainly, the prospects for BlackBerry stock would have moved from bad to dismal. The company has had to compete against the “Android” giants, including Alphabet Inc (NASDAQ:GOOG), which has issued new “Google”-branded phones, and Apple Inc. (NASDAQ:AAPL), with its popular “iPhones.”
BlackBerry needed a major shift to save BBRY stock. The shift to more software and services was always going to serve as the axis upon which the transformation would revolve. BlackBerry’s earnings, for the past few years, have come ever more from software sales. But, if this has not impressed investors, BlackBerry stock should ultimately gain from what has become a full-scale transformation.
Cars, Rather than Smartphones, Could Invigorate BBRY Stock
On October 31, BlackBerry said it signed an agreement with Ford Motor Company (NYSE:F) to install Blackberry’s “QNX” operating system in all of the Detroit giant’s cars. To get an idea of the potential size of the deal, note that Ford sold over 6.6 million cars in 2015. The figure could be higher in 2016, and has grown steadily since 2012. As investors realize the potential in this plan, BBRY stock could see gains.
Perhaps if the public had any idea that Blackberry’s QNX already powers the infotainment systems of some 60 million vehicles worldwide, BBRY would be trading a little higher. Ford’s customers probably already use QNX technology without knowing it. Indeed, Ford’s “Sync 3” version of its infotainment system runs on QNX. (Source: “BlackBerry teaming up with Ford for broader use of QNX in connected cars,” TechCrunch, November 1, 2016.)
Originally developed by QNX Software Systems Limited, a Canadian company that Blackberry bought in 2010, the QNX operating system has earned a reputation for reliability and flexibility. It can easily be integrated into embedded electronics. In a vehicle, it powers the infotainment system, but it can also manage audio, navigation, or reverse cameras. The operating system can also manage electric power steering, which is growing in popularity.
QNX has become very popular in the automotive industry. But, so far, the budding relationship between BlackBerry and automakers has not been as direct as the new agreement with Ford will ensure. This is the first tier-1 supplier agreement between Blackberry and a car manufacturer.
The details of the agreement aren’t clear but, given what QNX can already do, the market can expect to see the software being applied to perform autonomous driving functions. (Source: “BlackBerry Launches New Software for Driverless Cars,” The Wall Street Journal, January 6, 2016.)
Driverless Functionality Is the Next Big Thing in the Automotive Industry
It’s a revolution, and drivers like me, who enjoy raw mechanical power, few electronic driving aids, and a wide-open mountain road, must adapt. There’s no stopping it. That’s why the Ford deal could be so important, and so bullish for BBRY stock. Software is becoming increasingly important to car manufacturers.
Infotainment, moreover, plays a crucial role in the kind of cars that consumers choose these days. These features have become as important as—if not more than—as the engine or transmission, let alone the interior trim. As such, carmakers need to get closer to software developers.
BlackBerry does not exclude the possibility of signing similar agreements with other carmakers.
The financial benefits of the Ford agreement for the Canadian company have not been disclosed. But it certainly opens the possibilities for potential takeover candidates. In other words, the growing demand for software in the car industry has turned companies like BlackBerry into acquisition targets for auto companies in Detroit, and in Tokyo and Stuttgart for that matter.