Many meme-stock investors last year were looking to leverage the established BlackBerry BB brand that's now part of a portfolio of licensing deals. But licensing sales have been suspended as the company works to sell its patent portfolio. Now, we see a new side to BlackBerry that may interest all investors.
BlackBerry's new "Internet of Things" business, which includes applications in autonomous vehicles, is up 19% year-over-year with a backlog of future sales. Some investors may be betting on an inflection point where BlackBerry's flagship enterprise cybersecurity software takes on the likes of Microsoft or VMware. But as equity analyst William Kerwin explains, these companies are entrenched, and BlackBerry can't match their switching costs. In fact, one of BlackBerry's selling points, a centralized solution for all devices, presents a low switching cost in and of itself.
Considering competitors' software requires longer implementation times and intertwines with more companywide operating procedures, it's hard to award BlackBerry an economic moat. As BlackBerry stock price has fallen below the expectations of speculators, long-term investors may see the opportunity that's behind the scenes in autonomous vehicles with embedded software. We think the firm's greatest growth opportunities will come from connected and autonomous vehicles with the QNX software business, even though they're being too nice in the switching costs there as well.
For Morningstar, I'm Andrew Willis.
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