BlackBerry: Restructuring Updates Don’t Alter Our Long-Term Thesis or No-Moat Rating

We maintain our $4.90 fair value estimate for no-moat BlackBerry after the firm provided a midquarter restructuring update and reaffirmed its fiscal fourth-quarter guidance. BlackBerry's ongoing separation of its business into two distinct internal organizations is being accompanied by cost-cutting in the form of office closures and layoffs to improve firmwide profitability. This is particularly concentrated in the cybersecurity business, and we see these changes as the first impact on the company by its new CEO, John Giamatteo. We like the focus on cash flow and profitability for a company that has been losing money since 2019. Still, our long-term thesis and no-moat rating on BlackBerry are unchanged. We continue to see the firm's cyber business as an underperformer, even with streamlined expenses, and hold a favorable view of the Internet of Things business. We think BlackBerry may try to spin off the cyber business in a couple of years when it holds a better profit profile. We see shares as undervalued but emphasize our Very High Uncertainty Rating and would recommend moatier companies under our coverage to investors.