$BB BlackBerry: the Most Undervalued Tech Platform on Earth
Deep Dive
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Summary:
- $BB´s current business is ok priced and has a very cheap implicit call option on what is likely to be one of the biggest tech platforms 5–10 years down the line.
- $BB has a relatively stable financial situation, increasingly competitive products and is now focusing on sales. All the above makes this an asymmetric investment opportunity.
The toughest thing about investing is knowing when you are tricking yourself into believing something that may not be real. Over the past 6 years, listening closely to my intuition has payed off well in terms of investments. However, over the last week or so, I have been mentally wrestling with the position I initiated (mostly out of intuition) in $BB last winter. Today, I bring you my updated conclusions. In essence, seen with a linear mindset $BB may look like a relatively boring and even fairly valued IT business. Seeing the forest for the trees, however, it looks to me like deep value and like what is likely to be the cheapest tech platform on earth today, with the properties of an asymmetric investment.
To cut a long story short, $BB´s QNX real-time OS is installed in 195M cars today, out of 1.4B cars in total on the road worldwide. QNX enables many different software pieces to run in a car, so acts as a kind of central control unit. QNX is becoming the predominant OS for connected cars, since it´s installed in so many cars. Whilst today $BB licenses QNX to OEMs on a per-unit royalty basis, QNX is effectively set up (through Blackberry Ivy, in partnership with $AMZN) to be the foundation of the data value chain for the auto industry, which McKinsey estimates will be quite big, specially for a company ($BB) with a market cap of 5B$ today. I think this will extend to other verticals over the next decade.
Blackberry IVY is going to enable vehicle data to be translated into vehicle applications that drive value for OEMs, drivers and other stakeholders like insurance companies. It´s most likely going to capture value through fees.
Let´s dive into further detail.
