BlackBerry (BB) certainly earned the new yearly closing high in the last week. The former smartphone giant reportedly inked a deal with Baidu (BIDU) for connected-cars. With QNX once again a central component in automobiles and in China’s market, revenue growth is assured.
BlackBerry will anchor ADAS in Baidu’s car solution. Although the QNX technology the company showcase has nothing new (it was introduced at CES last year in 2017), markets are optimistic this market will bring in revenue. BlackBerry floundered with its licensing of smartphone devices after licensing the business to TCL. It is a market the company would have lost: Apple (AAPL) is leading the refresh with the latest iPhone 8 and iPhone X. It has smartwatches and health devices connected to it. Samsung (SSNLF) did well with the Galaxy S8. An upcoming S9, which will have face-recognition like the iPhone X, would most likely hurt BlackBerry device sales even more.
Thankfully, in the automotive market, autonomous driving and infotainment will raise the addressable market for QNX. As Baidu moves from a prototype to a production system, QNX will make the IP revenue a bigger percentage of BlackBerry’s revenues. With full autonomy by 2020, brisk sales of Baidu-based cars will not only add to BlackBerry’s IP revenue but it will give profit margins a lift. With BB stock rallying significantly, investors are betting Baidu and other automakers decide to use more components of QNX.
