BlackBerry: We Like the Separation of the IoT and Cybersecurity Businesses and So Should Investors

No-moat BlackBerry announced its intention to separate into two distinct businesses on Oct. 4, and we maintain our $4.90 fair value estimate for the combined firm. We are pleased with the announcement, which would bifurcate the Internet of Things and cybersecurity businesses. We believe BlackBerry’s IoT business is the highest-value portion of the firm, and investors will find it an attractive investment as a stand-alone software stock. Meanwhile, the enterprise cybersecurity business has been struggling for some time, in part due to problems with its go-to-market approach, in our view. Still, we think both businesses can find better execution and valuation as separate entities. We see shares as fairly valued, even after trading slightly higher afterhours following the announcement.