![]() Market's lack of reaction to recent positive developments. According to BlackBerry CEO John Chen, the reason behind the proposed strategic review is Mr. The dividend policy of a company, the use of buyback programs, the capital structure, management compensation, and strategic business decisions provide valuable insights into the qualities of managers. We assess the shareholder friendliness of a management team by what they do - not what they say. Creating Shareholder Value Takes TimeĪt Beat Billions, we try to invest in companies that are led by shareholder-friendly managers. ![]() I expect a business separation to remove some complexities, thereby creating a good platform for the IoT business to attract new talent and thrive. Third, as a focused business in the IoT sector, BlackBerry will be able to take aggressive business decisions that will drive this business unit higher without having to juggle all the balls at the same time as it is forced to do today. This is where I believe BlackBerry shareholders will benefit the most. Market will finally look at BlackBerry as a company with a future - not a dead business that is trying in vain to resurrect itself. Second, the company will be able to attract high valuation multiples for its IoT business in the absence of the poorly performing cybersecurity business. From a financial perspective, I do not believe investors will have a lot to cheer about if the company divests its cybersecurity business. A large cybersecurity company, however, might consider taking over this business for pennies on the dollar to gain access to BlackBerry's technology and its clients. There will be financial and market implications for such a decision.įirst, BlackBerry's cybersecurity business is unlikely to attract a high value, given that it is struggling. If BlackBerry goes down the path of separating its business units, the company is likely to look for a seller for its underperforming cybersecurity business. The company's go-to-market strategy has come under scrutiny, and the competition in this sector is fierce. The IoT division of BlackBerry, with a scalable product portfolio and existing business relationships, is likely to deliver double-digit growth for many years when the global economy recovers from the current challenges.īlackBerry's lackluster financial performance in recent years has a lot to do with the continued failure of its cybersecurity business. QNX software is versatile and caters to many end markets such as infotainment systems, cockpit controllers, and advanced driver assistance systems (emergency braking, night vision, blind spot monitoring, etc.). ![]() There is a growing demand for high-end vehicles that are packed with advanced tech features and autonomous vehicles are expected to make waves in the next few years, both of which are positive developments for BlackBerry. The company already serves many large automobile manufacturers and enjoys a leading market share of the automotive operating system market, which is expected to grow at a CAGR of over 9% through 2030. The QNX business has a long runway for growth, aided by the growing demand for advanced capabilities in new passenger cars. A Business Separation Is Likely To Create ValueĮver since I published my first article on BlackBerry, I have been optimistic about what the future holds for its IoT business. The strategic review that will be initiated by the company is most certainly a step in the right direction, but I will not invest in the company today. I welcomed BlackBerry's decision to look for new buyers for its patent portfolio in March, but I did not believe at the time that the company would fetch $900 million for its patent portfolio after evaluating the remaining shelf life of patents. I assigned BlackBerry stock a 'hold' rating when I first covered the company in May 2021, and the company's business decisions and financial performance have failed to convince me to change my stance ever since. Kelvin Cheng/iStock Editorial via Getty ImagesīlackBerry Limited ( NYSE: BB) shares surged more than 9% in after-hours trading yesterday, with the company's Board of Directors announcing a strategic review to assess alternative strategies to enhance shareholder value. ![]()
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