Blackberry Stock: Why The Hype?

People are investing in Blackberry due to a combination of hype, speculation, and the company's transition from a smartphone manufacturer to a software company. Blackberry's stock rose sharply in December 2020 after the company announced a partnership with Amazon Web Services (AWS) to develop a cloud-based automotive platform, and again in January 2021 after settling patent infringement lawsuits and securing another automotive deal with Chinese tech giant Baidu. The stock became a target of the Reddit-fueled short squeezes, attracting more speculators. Additionally, Blackberry's focus on software and services, particularly in cybersecurity and automotive systems, shows promising growth potential. However, some investors remain cautious, waiting for stronger signs of organic growth and improved return on invested capital before jumping in.

Collaboration with Amazon Web Services

BlackBerry's collaboration with Amazon Web Services (AWS) has been a significant development that has attracted investors' attention. The partnership was announced in December 2020 and involves the co-development of a cloud-based automotive platform called IVY, based on BlackBerry's embedded operating system QNX.

The AWS-powered BlackBerry platform combines the safety and security of BlackBerry's QNX real-time operating system with AWS's Internet of Things (IoT) Services in the cloud and in the car. This integration enables automotive manufacturers to securely access and utilise data from vehicle sensors, creating software applications and machine-learning models for connected, electric, and autonomous vehicles.

The platform offers automotive OEMs (original equipment manufacturers) a range of benefits, including expedited time-to-market for innovative connected vehicle services. These services include cockpit personalisation, vehicle acoustic conditioning, vehicle health monitoring, and advanced driver assistance systems (ADAS). Additionally, car companies can leverage the platform for their software-centric electric car and autonomous platforms, enabling essential functions such as continuous EV battery life monitoring and prediction, and managing vehicle subsystems.

The collaboration between BlackBerry and AWS provides a comprehensive edge-to-cloud offering for the global automotive industry. The QNX software allows OEMs to develop and run a common software platform across various in-vehicle systems, while AWS capabilities enable developers to securely access vehicle sensor data and build software applications and machine-learning models.

The partnership between BlackBerry and AWS showcases the potential for digital transformation in the automotive industry. By working together, they are solving complex problems and accelerating the future of vehicle technology, ensuring that automakers can deliver a secure and reliable driving experience that meets consumer expectations.

QNX software

QNX is used in a variety of devices, including automobiles, medical devices, program logic controllers, automated manufacturing, trains, ventilators, and more. It is the embedded OS of choice for many of these applications.

In 2004, the company was sold to Harman International Industries, and since then, QNX software has been designed into over 200 different automobile makes and models. In 2010, Research In Motion (later renamed to BlackBerry Limited) acquired QNX Software Systems.

BlackBerry's QNX OS 8.0 is now available in the cloud, and the company offers a 30-day free evaluation of its RTOS, tools, and services. QNX provides a modular microkernel architecture that delivers security, reliability, and streamlined OS development.

In December 2023, QNX released QNX SDP 8.0, which is powered by a next-generation microkernel with support for the latest Intel and ARM 64-bit platforms. This release further enhances the capabilities of the QNX real-time operating system.

BlackBerry's partnership with Amazon Web Services to co-develop IVY, a cloud-based automotive platform based on QNX, has brought attention to the company and its QNX software. The integration of QNX into Baidu's maps in forthcoming electric vehicles from GAC Group is another example of how QNX is being utilized in the automotive industry.

Cybersecurity business

BlackBerry's cybersecurity business has been bolstered by its Spark Suites security product, which provides companies and governments with a range of tailored cybersecurity and endpoint management options. BlackBerry has integrated endpoint management, user authentication, and application and data encryption with artificial intelligence (AI), machine learning (ML), and automation for improved cyber threat prevention and remediation. This comprehensive and competitive development is expected to positively impact the company's financial results over time.

In addition to its cybersecurity offerings, BlackBerry has also expanded its business through partnerships with Amazon Web Services (AWS) and Chinese tech giant Baidu. The collaboration with AWS led to the development of BlackBerry IVY, an intelligent vehicle data platform that will help automakers use vehicle data to create actionable insights and improve driving safety. The partnership with Baidu will integrate BlackBerry's QNX software into Baidu's maps in forthcoming electric vehicles from GAC Group. These partnerships have brought attention to the potential of BlackBerry's remaining business and have likely caused investors to take a fresh look at the stock.

BlackBerry's revenue rose 15% in fiscal 2020, which was the first time the company achieved revenue growth in over a decade. This growth was attributed to the acquisition of the cybersecurity firm Cylance and higher patent licensing revenue. However, in the first nine months of 2021, BlackBerry's revenue declined 10% year-over-year to $683 million due to the impact of the pandemic on the auto industry.

While BlackBerry's stock has seen significant gains, it is important to consider the underlying fundamentals of the company. The company faces significant challenges from other cybersecurity companies, and its licensing business will eventually run out of companies to sue and patents to sell. Therefore, investors should carefully consider the risks and potential rewards before investing in BlackBerry.

Patent-infringement lawsuit with Facebook

In 2018, BlackBerry sued Facebook, claiming that the company had infringed its patents by using BlackBerry inventions in its popular messaging applications. Facebook responded with a successful campaign to challenge BlackBerry's patents in court, and launched its own suit, accusing BlackBerry of infringing on voice messaging technology patents.

Facebook was able to keep BlackBerry from any significant court victories or settlements until late 2020, when a Federal Circuit panel indicated disagreement with the previous ruling on the validity of BlackBerry's patent claims. This gave some hope to BlackBerry's patent infringement claims.

In 2021, BlackBerry and Facebook reached a settlement in their global patent fight. The terms of the settlement were not disclosed, but the news continued a streak of recent victories for BlackBerry. The settlement caused BlackBerry's stock to jump by as much as 20%, continuing a run that has seen the Canada-based company's stock rise more than 134% in the previous six months.

Short squeeze

BlackBerry's stock surge has been attributed to a short squeeze, fuelled by discussions on the Reddit forum r/WallStreetBets.

A short squeeze occurs when a stock that is being heavily shorted increases in price, forcing short sellers to cover their positions by buying the stock, which in turn pushes the price even higher. In the case of BlackBerry, the stock was one of the most talked-about on the forum, which encouraged a wave of speculative buying. This was further amplified by the return of Roaring Kitty, the trader who kickstarted the meme stock rally in 2021.

The short squeeze on BlackBerry's stock was part of a broader trend of "meme stocks" experiencing a resurgence in 2024, with other companies such as GameStop, AMC Entertainment, and SunPower also seeing significant gains.

While the short squeeze resulted in substantial gains for BlackBerry investors, it is important to note that these types of investments are highly speculative and carry significant risks. As such, long-term investors are advised to approach these situations with caution.

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