Research In Positive Motion: The Compelling New Argument for Blackberry (BB)

Yes, Blackberry still makes handsets. But it has reinvented itself as a business applications provider, and intelligent vehicles is what give it long-term motion with investors.

Is it just us, or have you developed the same strange rituals we have after all these years of perceiving value out of the fog of investor gloom? One of our favorite time-worn superstitions is taking a wander around the halls of the Consumer Electronics Show. That is, the early January geek fest that has taken place in the Las Vegas high desert, seemingly since times immemorial. We are always on the hunt for Vegas CES show romance. That is the sexy new business finding a new audience, and maybe a new stock to bet on. And one of the juiciest CES love stories ever was, of course, Blackberry (BB), known for a time as Research in Motion or RIMM.

We can remember the 2006 CES like it was like yesterday: The big hall, with the Big Names like Microsoft and Google. But nobody cared. The real action, was off the in the corner at a smaller jam-packed both. There was smallish Canadian-based firm from a place called Waterloo -- like everybody knew that was Ontario and not where Napoleon got defeated – called Blackberry.

Forget Bradley Cooper and Lady Gaga, did BlackBerry know sell investor love and drama. Research in Motion had stone lock on mobile corporate communications, plus a proprietary coding platform called QNX that was surely going to be lever into the entire smartphone revolution. QNX was fast, light and beyond the reach of the real software monsters like Google, Apple or Microsoft. Was anybody surprised when a share of BlackBerry touched $125? No they were not.

They just don’t write ‘em like this anymore.

The real heartbreak was coming: The 2008 crash came along and RIMM’s problems came to light: The operation was arrogant and slow. It had terrible customer service. It had not answer touch-screen mobile devices like the iPhone. And sales just simply ended. The numbers are ghastly. $3.3 billion in revenue by 2015, down from $18.4 billion just three years ago. And where are we in Full-year for 2018: Blackberry really only sold something like $967 million of software. Short traders were more than happy to help revalue the stock. And starting back in 2012, the ticker tanked to about $6.00 per share.

And for good reason, in a world foolish enough to allow only a handful information companies to handle all the world’s information, what is there for a little old BlackBerry to do?

Back from the Dead. 

But this past CES saw a new story for Blackberry. The operation has begun to make money selling software application services, aimed at particular sectors like financial services, government and healthcare. The strategy that has worked for other aging tech plays like IBM and Microsoft. Blackberry has made sensible handset deals with smaller cell providers like T-Mobile and Sprint. There is denying the ergonomic beauty of the original physical Blackberry keyboard. for typing. And the company now tells a real story for security, custom integration and most interestingly of all, automotive information management.

Blackberry’s QNX language has quietly become a nice little developer tool for the kind of embedded systems ideal in cars. While certainly finding qualified developers can be a headache, if we were Ford, Nissan or BMW, who would we want to deal with? Imperfect Blackberry or utterly predatory Google or Apple?

Some smart people are flowing into the operation. Crafty Brian Palma was pulled out of Cisco to be a Chief Operations Officer to manage its security integration with Cylance.

here is a lot to like in the institutional commitment showing up in this stock. A quick look at the SEC documents shows names you wouldn’t normally see in company this fragile. Vanguard Group, Fairfax Financial and PrimeCap have something like 25 percent of outstanding shares. We also like how smaller investors, with sensible managers are also holders. For example Greenwich Connecticut’s FOX Run or New York City Engineer’s Gate, both of, which at least to our basic back of the envelope analysis, are seeing some reasonable upside.

Obviously, shares this cheap are not for the larger fund manager. Who can bother with the problems of buying and selling these kinds of small numbers? And certainly real growth is few quarters away. Projections we like seem to say it will be 2020 before the firm is back above $1 billion in sales. But for the smaller investment shops looking for exposure into the software world they are priced out of, some research into Blackberry’s new take on motion should yield some return.

Pricey Software Application Space On the Cheap.

See the deep value argument here? Blackberry for all its faults, is a reasonable comparative bet in software applications services sector dominated by such insanely pricey tickers like Alphabet, or SAP.

And isn’t that what we die-hard equity romantics seek in stock story? A little love, on the cheap.