BlackBerry (TSX:BB) is still a shadow of its former self. Its brand is known synonymously for failed smartphone devices. CEO John Chen continues to steer the company away from that. His latest move is buying Cylance for a whopping $1.4 billion.
For several quarters since its buyout of Good Technology, BlackBerry sat on a pile of cash. It could have used the cash to cover its debt. Since debt/equity is just 0.3 times, the firm is better off doubling down on its QNX and ADAS business. Adding AI and cybersecurity to its business will improve its end-to-end offering. It moves the company further along the shift into software to manage mobile devices.
The growth in the autonomous car market will continue to outpace the smartphone market. Paying up for Cylance now gives BlackBerry an asset that could have been worth more, had Cylance IPO’d.
The CEO said "Cylance's leadership in artificial intelligence and cybersecurity will immediately complement our entire portfolio."
Valuation
BlackBerry’s downtrend on the stock market may continue to pressure the stock. Shareholders took advantage of every price spike - $13 in March, $12 in June, and $11.50 in October – to sell. Give the company a few quarters to integrate Cylance. By then, it may add to revenue growth.
