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BlackBerry Redux

September 24, 2020

When you left the office back in the ‘80s and ‘90s, you were at risk.

You had primitive mobile devices and no way to check email or text. I remember going through a litany of devices, and they each kind of worked, but nothing like BlackBerry (BB).

I became plugged in from Central China to Russia to Latin America. Even at sea, my BlackBerry always worked.

Today, BlackBerry doesn’t make a single phone. Instead, it provides the software and security for communications of voice and data for industries ranging from cloud computing companies, such as Amazon’s Web Services and Microsoft’s Azure, to power-grid operators and power-generation companies, robotic operations of manufacturers and 90%+ of automakers.

For the first quarter of 2020 alone, according to analysis by Momentum Cyber and Arkos Labs (private), there were on average 55 cyber attacks every second of every day, 24/7. And that’s only what was tracked. Your devices—all devices—are at risk.

BlackBerry, through its own inventions and acquisitions, including Cylance last year, has built up a collection of nearly 30,000 patents, with over 1,000 more in application and more to follow. At its core, it provides secure connections that are used by 77% of the Fortune 100 companies to make everything work while staying locked down.

And of course, the rapidly advancing 5G communications and autonomous vehicles markets are increasingly dependent on the products and services of BlackBerry. For 5G, data communications in larger amounts at faster speeds with lower latency means that thieves have more to steal. And for systems to work quicker and better, they need to be secure.

The automotive sector is where BlackBerry has a long history. Its QNX software platform is embedded in the vast majority of modern cars, running everything from infotainment systems to advanced driver assistance systems (ADAS). That’s the safety stuff that makes semi-autonomous cars safer.

But to make autonomous cars work, they need to constantly communicate with each other in real time to avoid accidents. BlackBerry’s embedded systems and software and security really doesn’t have a peer for the autonomous car communications market.

Great Stuff, Bad Name

BlackBerry isn’t fully appreciated for what it is today. Its licensing agreement with TCL (TCLHF) to allow it to make BlackBerry phones with security from the company on the Android platform has kept its image in retro mode.

 

BlackBerry Stock Price—Source: Bloomberg Finance, L.P.

BlackBerry is trading under $5.00 a share, which values all of the patents, products, services as well as all of the huge clients around the globe at peanuts. The price to intrinsic (book) value is only 1.38 times, which is a tiny fraction of most companies in this high-tech stratosphere. And it is only valued at 2.6 times its trailing sales, which are up by 15% over the past year.

The company has lots of cash, and debt is very low at only 19.5% of assets. But it needs some management improvements to shore up profits along with growth in its assets and revenues. It looks like a high-tech flier but without the stock market fanboys.

I’ve been following it for a long time and see it as an ideal takeover candidate; to be taken private by private equity or a special purpose acquisition company (SPAC). And with its cheap valuation and low stock price, it should be a target with the slew of new day traders.

This isn’t the type of stock I typically recommend. But I see so much value in its assets, its book of business and its prospects with security and systems for so many important developments, including 5G and autonomous and other higher-tech vehicles, that I am now on board.

To get my latest buy-under price and ongoing guidance for BlackBerry (BB), sign up to become a Profitable Investing subscriber today.

All My Best,

Neil George
Editor, Income Investor’s Digest & Profitable Investing
Author, Income for Life