BlackBerry Ltd. CEO John Chen and Canada’s Technology Innovation

Midas Letter
Midas Letter
BlackBerry Ltd. CEO John Chen and Canada's Technology Innovation

Jacob Securities’ Damian Wojcichowsky joined us recently to talk about BlackBerry (NASDAQ:BBRY) (TSE:BB) CEO John Chen’s formerly of SAP AG (NYSE:SAP) strategy for turning BlackBerry around focusing on the QNX operating system.


James West:                       Right. Okay so let’s talk a bit about…you mentioned BlackBerry Ltd.  What do you think of BlackBerry’s survival/growth prospects under John Chen, and how do you think that their business has been affected by Canada’s entrepreneurial environment?

Damian Wojcichowsky:   I really think BlackBerry has been a beneficiary of the R&D stuff that we already talked about. But it’s a really unique example of a blindingly innovative company. First to market, well before its time in terms of many things like the Smart Phone, email over the airwaves and so on. In terms of what I think the survivability of this company, I’m in the positive camp. I don’t formally cover the stock here at Jacob, though I have covered it in the past. I think there’s a bunch of things that are good for the current investor, and there’s a bunch of things that are good for the long term viability of the company.

So first and foremost, John Chen – he’s ex SAP AG (NYSE:SAP), but he’s actually ex Sybase. Sybase was a database company here in Canada which had gone the same trajectory as BlackBerry. It had lost about 95% of its market cap, it was running into existential questions. John Chen came, turned around the company, and then sold it to SAP at something like double its prior high valuation, and then went to work at SAP. So that’s what John Chen was doing prior to this engagement. This is his next Sybase, if you will. John Chen is a turnaround CEO. That is his bread and butter.

I think his personal characteristics – he’s a little bit cheeky. He calls brass tacks the way he sees them. So he’s come and told the market, ‘we’re going into the enterprise full bore’, which really implies that the consumer hardware part of the business that everyone really focuses right now on – especially if you’re a bear – that’s being de-emphasized. What’s being emphasized is where QNX is going, and what they can do with BBM on the enterprise side. Finding new applications for the existing assets that they have within the enterprise customer.

We all know BlackBerry as having been adopted by lawyers and bankers and accountants first. That’s how well like to think of it. That’s who had BlackBerries to start with. Then we had the phase of consumer rollout, and a certain period of success there and that’s where BlackBerry gained market share, became on of the top three handset makers and so on, what we’re seeing is a retrenchment back to that enterprise customer base that is still captive. In Toronto, we see very strong take-up of the new BlackBerry devices. But more importantly, on the hardware side, they’re focusing in on the region and the jurisdictions where, some of the BlackBerry assets, like BBM, are really popular.

So here’s a really interesting anecdotal example: We’ve got a large Jamaican population in Toronto, and as it turns out, BlackBerry is really popular in Jamaica because you can use BBM to talk to your family here in Toronto basically for free, if you’re not using your data. So you’ve got that phenomenon of BBM driving the handset device consumption in a lot of different developing nations where BBM enables basically free communication across borders. That’s unique and it’s not really that well known, and they need to monetize this, and that may or may not come, but having that demand is the first part of the equation.

I mentioned that the bears focus in on the hardware business and whether or not they’re going to resume selling devices. I think that’s the wrong way to look at it. I think you want to look at where QNX is selling through – we heard the Ford announcement that they’re ripping out Microsoft and using QNX in their automobiles. That announcement on its own put Blackberry through QNX into something like 70% of the automobiles that are being sold out there. Those are good numbers. Those are things that I don’t think are being reflected in the stock price at this point.


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