BlackBerry Limited (BB)

[Nelson2]

There’s hope. More patience

“BlackBerry intends to IPO its IoT business—of which the majority is the QNX software for autonomous vehicles and other devices. We view QNX as best-of-breed base-level and hypervisor software for cars and other connected machines, and model midteens sales growth for the IoT business over the next 10 years. We expect the IoT business to be an attractive stand-alone investment after an IPO, especially with strong automaker relationships and a marquee agreement with Amazon for its IVY product. We think the larger and relatively worse-performing cybersecurity segment has weighed on BlackBerry’s overall valuation against a smaller but competitively stronger IoT segment.
Additionally, we think a stand-alone cybersecurity business may be an attractive buyout candidate for a larger cybersecurity rival. In our view, BlackBerry’s actual technology is better than its perception in the enterprise marketplace, and it has struggled with its go-to-market approach to mend that disconnect. BlackBerry’s security business also boasts strong government customer relationships which could add to its attractiveness in a buyout.