Happy New Year, though it may not be for Blackberry fans. The company that has so often had their products compared to a certain addictive substance recently announced that they are ending support for Blackberry OS and Blackberry 10 devices.
What does this mean? While they won’t be bricking phones outright, they might as well be. On January 4th, Blackberry will be shutting off all the key services — data, SMS, phone calls, and 911 support. In official terms, they are ending network provisioning for these older devices, meaning that they won’t be able to join any cellular or WiFi networks.
Unless you’re old enough to remember, it may seem strange that these half-screen, half-keyboard machines once dominated the mobile market. But back then, the people who used them were texting wizards who had broken free from the chains of the T9 keyboard.
Though this news may not mean much except to a select few, it’s still sad to see the Blackberry era come to a true end. We never had one ourselves during the heyday, though we did pick up a cheap used model to carry around as a tiny mobile writing device and calendar. We sure do miss phones with real keyboards though, and would love to see them come back. At least the keyboards themselves get love in the hacker community.
[Main and thumbnail images via Digital Trends]
BlackBerry Limited (NYSE:BB) is no longer the company that you may think it is. While it came into prominence as a maker of smartphones with a readily-distinguishable physical keyboard, that business is no longer in operation as of Q1 2022.
This rise-and-fall played out across corporate boardrooms, Wall Street, and, of course, the stock itself. Throughout this time BlackBerry saw its shares rise as high as $140 in the run-up to the financial crisis, only to subsequently crater, bounce around a bit, and then peter out into its current state.
Now trading at under $5 a share, this once-dominant company has had to reinvent itself as an enterprise technology services provider focused on cybersecurity. This was marked by the appointment of a new CEO, John S. Chen, in Q4 2013. No longer in the business of selling hardware itself, it is now a software company focused on three core verticals, as per its 2022 fiscal Q1 10-Q filing:
1. Cybersecurity | "BlackBerry Spark. A unified endpoint management system for communications in a zero-trust environment."
In plain English, this is software that allows devices to securely communicate with each other across a network. Additional offerings within this vertical include BlackBerry Cyber Suite, BlackBerry Dynamics, BlackBerry Workspaces, BlackBerry AtHoc, and BlackBerry Alert, which are all focused on different layers of mobile device security.
This revenue line also includes SecuSUITE, a maximum-security messaging capability (voice/text) that is sold into the public sector.
2. IoT (Internet of Things) | "BlackBerry Technology Solutions and BlackBerry IVY"
BlackBerry Technology Solutions, or BTS, is primarily centered around BlackBerry QNX, which is a "real-time operating system" and associated technologies for "connected embedded systems."
This means that BlackBerry QNX is software for networked devices that have a computer embedded in them. An embedded system is a hardware device with a specific functionality that requires a computer integrated into it to work – this includes a wide variety of devices such as cars, medical equipment, and mobile phones. Notably, this does not include standard computers in and of itself, but the variety of embedded devices is quite significant and can even include things such as modern farming equipment.
The other business line within BTS is BlackBerry IVY, which is a specific instantiation of its QNX technology for automobiles. This technology integrates data from across the sensory output of the vehicle, allowing a more granular view than was previously possible into the vehicle. As mentioned it is structured so as to support "multiple vehicle operating systems" and "multi cloud deployments," which means the technology is generalized enough to work across a wide spectrum of both hardware and software systems. This kind of generalized system is considered advantageous in a software context, as it requires much less "reinventing the wheel." Additionally, if Amazon Web Services (AWS) is involved, it is fair to assume that there is a significant TAM (total addressable market) to go after – this has certainly been the case thus far.
Other software services within this vertical include BlackBerry Radar and BlackBerry Jarvis, which are utilized to ensure the security of networked embedded devices at different layers.
The Licensing business primarily involves licensing the company’s legacy intellectual property. It is distinct from the services outlined above in that it makes use of the firm’s extant patent portfolio as opposed to these relatively new services; this serves as a way for the company to harvest additional revenues from intellectual property it had already developed previously.
Taking all of this together, we see that BlackBerry is completely different from what it used to be.
Nonetheless, the software services business can indeed be a good one – BlackBerry partner Amazon Web Services is perhaps the best example of that. Much higher gross margins are perhaps the key economic facet that distinguish this kind of business from the company’s previous revenue line of selling phones.
The next section will review the company’s financial performance since 2013 to see how its decade-long pivot is coming along.
The revenue picture at first glance is not a pretty one, but this is to be expected. As it now stands, the company’s revenues are a mere 6.5% of what they were in Q1 2013 – not something any investor likes to see.
Nonetheless, we must recall that this company is in the process of reinventing itself, although it appears to be taking some time; worth noting is that gross margins (revenue/cost of revenues) have been increasing throughout. This is to be expected for the new business lines, and I will add that this figure is basically as high as gross margins get in most any business.
Breaking out the quarterly figures, we unfortunately see a picture of mostly declining revenues, albeit with a strong gross margin each time:
This does not bode well, although worth noting is that the IoT business is still seeing double-digit growth of 28% YoY. Although the other business lines don’t have such remarkable figures, this kind of growth can add up long-term.
Keeping to the quarterly view over the last 10 quarters, the picture becomes more nuanced. Even as revenues have been mostly-declining, BlackBerry has posted a positive net income for 2 of the last 10 quarters. This is a preliminary, albeit significant, indicator that its new business model is viable.
Looking over to the cash side of the books, we again see a very mixed picture – yet the occasionally strong quarter. Six of the last ten quarters had positive cash from operations, which is another indicator that the new business model works (sometimes).
Taking a look at the cash & cash flow situation, we see that the company still has a positive (although decreasing) book value per share, $2.30 as of Q2 2022:
The net debt figure has remained negative throughout the last 10 quarters, meaning that the company has more cash & cash equivalents than it does liabilities.
As to cash flow, BlackBerry is not dealing with significant interest payments and has had two quarters where this number was immaterial.
Additionally, it generated positive levered free cash flow for 6 of the last 10 quarters. This is worth dwelling on as it feeds right into EBITDA; it means that the company was able to generate positive cash flows even after servicing its debts. I interpret this as a particularly strong signal.
Overall BlackBerry’s books are a mixed bag, but aren’t anywhere near as bad as they may seem. The story here to me is clear: it has proven its business model and has been able to generate cash, but it isn’t posting the kinds of revenues where it is sustainably generating profits and/or cash flow.
BlackBerry, as an embedded device software company, has been particularly sensitive to supply chain disruptions in the chip space. These disruptions have been more pronounced and prolonged than those within other commodities, and unfortunately, we are still not back to pre-pandemic baseline in this regard as per the latest earnings call. This prohibits the amount of embedded devices that can come to market at a given time, which in turn decreases revenues for BlackBerry.
Nonetheless, the company has shown that its new business model can generate cash flow. As to secular trends, I would not hesitate to say that embedded devices & the internet of things will continue to grow – and significantly at that. Once the chip situation clears up BlackBerry will be good to post larger revenues and in turn, could generate significant sustained cash flows.
Additionally, it has added brand-name customers as per its latest earnings report, including the New York Stock Exchange as well as the U.S. Department of Treasury. Customers like this don’t come along unless you have a leading offering in the space, which it seems that BlackBerry does. I actually think BlackBerry can do quite well in its new niche, but the short term will be difficult. On a longer time horizon, I will have to disagree with the market at present and call BlackBerry Limited stock a buy.
The BlackBerry Priv gave users a large touchscreen display as well as a physical keyboard that could be accessed by simply sliding the display upwards. The 5.43-inch AMOLED display was curved around the sides and had a 2560x1440 resolution. Although the physical keyboard could register sliding gestures across the keys for scrolling, text selection, and autocomplete text suggestions, many users had issues getting these gestures to work.
This was the first BlackBerry smartphone that did not run proprietary BlackBerry OS or BlackBerry 10 platforms. Instead, it adopted Android, with a custom interface and features inspired by traditional BlackBerry devices, like a custom email client.
Also, the Priv had the largest battery and storage capacity on a BlackBerry device to date. Its 3,410 mAh battery was capable of Qi wireless charging, and though it had only 32 GB of built-in storage, you could add extra storage with a microSD card. The camera setup received major upgrades as well, with a 2-megapixel front camera and an 18-megapixel rear camera with the ability to film videos in 4K resolution at 30 frames per second.
With Bluetooth 4.1, a hexacore Snapdragon 808 CPU, and a combination of virtual and physical keyboards, many business professionals loved the BlackBerry Priv. However, some critics at the time noted that the specs on BlackBerry's Priv matched those of its competitors, but the Priv had a much higher price tag.
BlackBerry Ltd. is making its QNX operating system, which is used to power cars and edge computing devices, available on Amazon Web Services Inc.’s cloud platform.
BlackBerry announced the update today at AWS re:Invent 2022 in Las Vegas.
Originally known as a handset maker, BlackBerry has over the past decade shifted its focus to the enterprise software market. The Waterloo, Canada-based company now generates most of its revenue from selling cybersecurity tools and software for powering connected devices. QNX, the operating system that BlackBerry is making available on AWS, is one of its flagship products.
QNX is a specialized operating system that can be installed in a vehicle to power its instrument cluster and other subsystems. According to BlackBerry, the software has been deployed in more than 215 million vehicles worldwide.
QNX is what’s known as a real-time operating system, or RTOS. An RTOS is a specialized type of operating system that ensures applications complete important processing tasks within a specific time frame. The ability to complete processing tasks without unexpected delays is important for many vehicle subsystems, particularly those that are involved in managing a car’s movement.
QNX includes features that optimize the reliability of a vehicle’s core software components. According to BlackBerry, QNX ensures that a failure in one software component won’t cause the others to malfunction. Additionally, the operating system can automatically restore malfunctioning software thanks to a built-in recovery tool.
BlackBerry will now enable automakers to run QNX in Amazon EC2 cloud instances. According to the company, an automaker’s developers can use a cloud-based deployment of QNX to develop and test new vehicle software. Tasks such as evaluating the reliability of a new application are simpler to carry out on cloud infrastructure than on a test vehicle running QNX.
Developers can use cloud-based QNX deployments alongside another BlackBerry offering called IVY. IVY is a suite of software tools designed to help automakers more easily process data from their vehicles’ built-in sensors. Some components of the toolkit are designed to run on a vehicle’s onboard computer, while other components are hosted in AWS.
According to BlackBerry, both QNX and IVY can run on EC2 instances powered by AWS’ Graviton2 processor. Graviton2 is an internally-developed processor that AWS debuted at re:Invent last year. It promises to provide up to 40% better price performance than comparable chips.
“Connecting our partners with other leaders around the technology that is transforming industries is what powers the innovation possible on AWS,” said Wendy Bauer, general manager of AWS Automotive. “Unlocking the potential of the cloud via our Graviton2 processors and seeing the ways companies like BlackBerry are making meaningful change – and helping enable hardware parity in automotive development — is energizing for AWS and the industry at large.”
BlackBerry has made the cloud version of QNX available in early access to a select group of customers. According to the company, those customers include automakers as well as a number of major auto parts suppliers.
BlackBerry says that the availability of QNX in AWS will also benefit companies beyond the auto industry. It envisions customers in the robotics, medical equipment, industrial controls, aerospace and defense sectors using cloud-based QNX environments to support their software development projects.
For years, BlackBerry was the most popular smartphone brand in the U.S. After failing to adjust to the rapidly-changing industry and falling to competitors like Apple and Google, the company pivoted to an entirely new direction. Now, it's focused solely on software and cybersecurity — trying to leave the iconic cellphones in the past. CNBC visited BlackBerry's Autonomous Vehicle Innovation Center and interviewed CEO John Chen to see what the company is up to now.
Sat, Nov 19 20229:29 AM EST
BlackBerry was once at the top of the smartphone market in the U.S. In 2010, almost half of smartphone subscribers in the U.S. used BlackBerrys, according to Comscore.
The phones were well-known for having a tactile keyboard and for BlackBerry's advanced cybersecurity — often favored among businesses and governments.
But after its phones fell out of favor with users, BlackBerry altered its course, taking some of the cornerstones of the business with it.
"After a few years, we realized that we would never get the volume up — and it's a volume game," said John Chen, CEO of BlackBerry. "And so we made that pivotal shift to a software-only company and focus on security and cyber and things of that sort."
While it stopped manufacturing phones, it didn't go far from the industry.
"Currently, BlackBerry has two main business units, a cybersecurity business unit and an IoT business unit within the cybersecurity business unit," said Charles Eagen, chief technology officer of BlackBerry.
Its cybersecurity unit focuses on securing things such as smartphone applications and mobile banking websites. Its internet of things unit focuses on the communication of technology within connected and autonomous cars.
"We now have the lion's share of embedded software in most of the cars," Chen said.
BlackBerry's technology is in roughly 215 million cars and this side of BlackBerry is continuing to grow, according to the company.
"If we look at the industry opportunity itself, it's our expectation that the auto software industry is going to roughly triple in size from 2020 through 2030," said Luke Junk, senior analyst at Baird.
However, BlackBerry does face competition in the cybersecurity industry, and in 2021 its revenue from cybersecurity was $500 million.
"I think that the company can reach likely a lower peak than we've seen in the past but a more sustainable growth trajectory and potentially more profitable future as well on a margin percentage basis," Junk said.
CNBC visited BlackBerry's Autonomous Vehicle Innovation Center and interviewed Chen to find out what's next for the company.
BlackBerry announced today that it is extending its use of Amazon Web Services (AWS) to make its QNX technology available to mission-critical embedded systems developers in the cloud.
The company made the announcement at the AWS re:Invent 2022 conference, underway this week in Las Vegas, and demonstrated its artificial intelligence (AI) data platform, BlackBerry IVY, running natively on Amazon Elastic Compute Cloud (Amazon EC2) instances powered by AWS Graviton2 processors. The demonstration focused on how developers will be able to leverage the cloud to streamline the development, testing, and integration of automotive AI-driven solutions that can then be deployed to run in-vehicle on automotive-grade hardware.
QNX is a software platform designed for embedded systems and their long lifecycles. It comprises the QNX Neutrino real-time operating system (RTOS) for ARM and x86 platforms, the QNX Momentics tool suite, and the QNX Software Center. BlackBerry IVY is a cloud connected automotive AI platform co-developed by BlackBerry and AWS.
The QNX RTOS running in the cloud functions as a cloud-native developer workbench that can be used independently or in conjunction with BlackBerry IVY, the company says. It includes two networking stacks: a Standard Networking stack to support basic networking requirements and a High-Performance Networking stack to support complex networking. "Its comprehensive POSIX-compliant development environment will be familiar to anyone who’s worked with Linux," the company says.
BlackBerry is billing the extended cloud capabilities to embedded systems developers in a range of industries, including automotive, robotics, medical devices, industrial controls, aerospace, and defense, among others.
Providing these capabilities in the cloud for the first time will help embedded systems developers accelerate collaboration and velocity across the entire product development and deployment lifecycle, said Grant Courville, vice president of product management and strategy at BlackBerry QNX, in a statement.
"Arming our customers with our foundational QNX software products in the cloud is a game changer for embedded developers as they will have easy access and scale available at their fingertips,” said he said.
Once a leading mobile phone provider, Waterloo, Ontario-based BlackBerry now leverages AI and machine learning to deliver solutions in cybersecurity, safety, and data privacy solutions. The company says it currently secures more than 500 million endpoints. including more than 215 million vehicles.
John K. Waters is the editor in chief of a number of Converge360.com sites, with a focus on high-end development, AI and future tech. He's been writing about cutting-edge technologies and culture of Silicon Valley for more than two decades, and he's written more than a dozen books. He also co-scripted the documentary film Silicon Valley: A 100 Year Renaissance, which aired on PBS. He can be reached at [email protected].
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