Mobileye Buyout Gives BlackBerry Shares Immediate 34% To 68% Upside

Summary

  • INTC announced this morning it was buying MBLY for $14B to $15B.
  • Apparently the autonomous driving market is hot enough to pay 39x sales.
  • We slap that multiple on BlackBerry's QNX segment and think BlackBerry shares can immediately push higher by 34% to 68% with much further upside in the future.
  • BlackBerry's QNX software is in 60 million vehicles already.
  • Mobileye transaction immediately puts BlackBerry on the block as a potential acquisition for numerous companies.

By Parke Shall

BlackBerry's (BBRY) QNX software is going to be looked in an entirely different light now that Intel (INTC) is said to have gone out to acquire Mobileye (MBLY) for $14 to $15 billion. This acquisition tells us that BlackBerry shares could be worth up to 68% more in the immediate term, and multiples of that in the future.

The move not only shows demand for automonous driving tools, but also shows that a large valuation could be paid for such software and hardware.

BlackBerry's QNX software is already "in" with major car names, having inked a deal with Ford (F) over the past year. The company's financial statements show exactly how widespread the use for QNX is. From BlackBerry's 40-F:

QNX is a global provider of operating systems, development tools, and middleware for the automotive, medical, industrial, consumer, networking, and defense markets. QNX is the recognized leader in software for automotive electronics, with products deployed in digital instrument clusters and in the infotainment and telematics systems of more than 60 million vehicles worldwide.

Over 40 automotive original equipment manufacturers ("OEMs") use QNX technology, in brands such as Audi, Bentley, BMW, Buick, Chevrolet, Chrysler, Ford, GMC, Honda, Hyundai, Jaguar, Kia, Land Rover, Maserati, Mercedes-Benz, Porsche, Toyota, and Volkswagen.

With its field-proven technology and suite of safety and security certifications, QNX is also a preferred supplier for companies building medical devices, train-control systems, industrial robots, hardware security modules, building automation systems, green energy solutions, and other mission-critical and safety-critical applications. QNX continues to attract new business through a growing portfolio of innovative products, including, an operating system for automotive safety, a platform for advanced driver assistance systems ("ADAS") and automated driving, a comprehensive in-car acoustics solution, hypervisor software that manages safety-critical systems in real-time, and a wireless framework that enables customers to upgrade their cellular and Wi-Fi hardware without having to recode or modify applications.

Given this morning's Mobileye buyout, BlackBerry's QNX now shines in a very different light. In over 60 million vehicles, QNX software could be look at a key piece of the autonomous driving puzzle that an acquirer like Intel could be interested in:

BlackBerry's QNX operating system not only powered the ill-fated BB10 operating system, but it also powers an assortment of mission-critical facilities and machinery around the world, ranging from nuclear power plants to medical devices. Another lesser-known use of that operating system is the infotainment system in your vehicle.

QNX is already installed in over 60 million vehicles, and BlackBerry has already an agreement with a major automotive manufacturer to push QNX deeper into the design of new vehicles, leveraging the scalability and security of QNX. Earlier this year at the CES show, BlackBerry showcased the latest version of QNX, which brings a host of improvements that will bring autonomous driving closer to a reality.

The company's software and services segment, over the last nine months, has produced $486 million for the company's last nine months and is on pace to do about $640 million for the year. Assuming QNX makes up about 5% or 10% of this revenue (we were unable to locate an exact number but we know QNX is a small, yet growing, portion of this segment), a model based on the MBLY could look something like this:

This is, of course, an immediate upside scenario that we are talking about. Blackberry's QNX software has an enormous runway for growth, especially considering the partnerships that the company has just signed. Using trailing 12 month numbers and what we believe to be conservative estimates of how much of the software and services segment QNX will make up, we believe BlackBerry shares could have immediate upside well into double digits.

As the company continues to cultivate its growth into autonomous driving technology and expands its reach with QNX, we believe that shares could see significant upside in excess of 100%, should the company continue its focus on autonomous driving successfully. We know that BlackBerry pushed autonomous driving strong at the latest CES show and the multiples of paid for Mobileye today show that BlackBerry could very easily, especially at this price, be a company that is targeted for a buyout.

This article was written by

Contributors: Scott Tzu, Parke Shall, Thom Lachenmann (contributors write under pen names for anonymity purposes) Please read Seeking Alpha's Policy on Anonymous Contributors to familiarize yourself with the site's terms and conditions relating to anonymous authors.
Follow

Disclosure: I am/we are long BBRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (155)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.