The realignment and strategic shifts in the cybersecurity industrial complex continue. On December 11, 2023, BlackBerry announced it would operate its US$418 million cybersecurity business and US$206 million Internet of Things (IoT) business as independent entities. The company also canceled its plans for an IoT subsidiary IPO.
BlackBerry’s IoT technology is used in 235 million (June 2023) cars. Blackberry (formerly Research in Motion) was founded in 1984 in Ontario, Canada. The company has made an impressive transition from an interactive pager and smartphone provider into a top-40 global cybersecurity company. 2023 revenue is US$656 million, with 64% coming from cybersecurity. Its US$1.4 billion acquisition of Cylance Inc. mostly comprises its cybersecurity business.
The company faces challenges, including the increased cost of selling cybersecurity vs. IoT solutions, two customers that account for more than 10% of its receivables, and US$371 million in debt interest and principal payments. Gross revenue for cybersecurity solutions declined by 23%. Presently, the cost of cybersecurity sales consumes 42% of respective revenue. Separating cybersecurity and IoT businesses makes a lot of sense, but ultimately, this analyst believes that BlackBerry will need to exit the IoT business to really focus on the higher-margin cybersecurity business.
What’s Next?
The company appointed John J. Giamatteo, the head of its cybersecurity business, as CEO, a precursor of company focus. Mr. Giamatteo has a rich background in cybersecurity, including time spent at McAfee and AVG Technologies.
BlackBerry’s endpoint protection products are generally well-liked in the market. BlackBerry sold off substantially all non-core patents in March 2023 for US$170 million in cash and a royal agreement that could bring upwards of US$900 million, so it will have some money to invest. With the right direction, this company could be a top 20 cybersecurity vendor in the next three years.
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