After exiting hardware, BlackBerry (BB) began the transition to become a software and services company. Their crown jewel is the QNX operating system which can be found running in some 120 million cars; that's an impressive number!
BlackBerry's business fundamentals have been well covered for the most recent quarter. I encourage you to read Bill Maurer's BlackBerry: Just Treading Water to understand the company fundamentals, as I won't be rehashing those here. Instead, I will dive right into the issue at hand which I believe negatively impacts BlackBerry and her investors.
One of the design wins for BlackBerry's automotive aspirations was announced back in January 2017:
But now, a year later, we see:
Why is this significant to BlackBerry investors?
Because QNX is not the in-dash infotainment operating system, it's Android. QNX is not the instrument cluster operating system, it's Linux, and QNX does not provide the hypervisor, it's OpenSynergy.
These are all the areas are very important to BlackBerry. IVI is QNX's bread and butter. Instrument clusters and the hypervisor for automotive are both areas where BlackBerry is trying to gain traction.
But here, today, choices are being made that cut QNX out of the picture.
One of the BlackBerry's most oft-sung praises for the QNX hypervisor is it's ISO certification. But then BlackBerry is not alone here.
The [OpenSynergy] hypervisor, the key component of the COQOS Micro SDK, creates independent virtual machines. The separation due to the VMs provides freedom from interference between the integrated systems, compliant to the software standard ISO 26262 (up to ASIL-D). This means that software systems with different safety levels (OTC:ASIL) or functions and environments of different vendors with different security standards, run concurrently on a single processor. Also, new, innovative functions with a high potential for change can be integrated together with relatively stable functions. The software in the virtual machines can be updated independently. (emphasis added.)
BlackBerry bulls will tell you that within automotive, in-dash infotainment is something near the exclusive domain of BlackBerry. And, that the instrument cluster and hypervisor are BlackBerry's area of expertise and will be dominated by BlackBerry going forward. But this latest product offering by Parrot Automotive seems to argue against the notion that BlackBerry is somehow a shoe-in these areas.
TOKYO, Japan, Berlin, Germany ― Renesas Electronics Corporation (TSE: 6723), an industry-leading supplier of automotive semiconductor solutions, and OpenSynergy, a market leader in automotive hypervisors, today announced that the Renesas’ system-on-chip (SoC) R-Car H3 and OpenSynergy’s COQOS Hypervisor SDK have been adopted on Parrot Faurecia’s automotive safe multi-display cockpit. The latest version of Android™ is the guest OS of the COQOS Hypervisor, which executes both the instrument cluster functionality, including safety-relevant display elements based on Linux, and the Android-based in-vehicle infotainment (IVI) on a single R-Car H3 SoC chip. The COQOS Hypervisor SDK shares the R-Car H3 GPU with Android and Linux allowing applications to be presented on multiple displays, realizing a powerful and flexible cockpit system.
In a recent article "BlackBerry: The Roller Coaster Ride Is Not Yet Over", I discuss how Volvo's sleek XC40 is running native Android in its infotainment system. Other authors have also highlighted the exodus from QNX 1, 2, 3, 4.
This assault on BlackBerry's automotive business looks to be gaining traction. Not only does Android provide the necessary compute power to run the infotainment system, but it can also provide an app store, something BlackBerry simply cannot ever hope to match.
The takeaway here is simple. BlackBerry is being threatened on all sides with regard to automotive: Android for IVI, Linux for instrument clusters, and OpenSynergy for the hypervisor. Even knowing QNX was running on Renesas’ system-on-chip (SoC) R-Car H3 was not enough to sway Parrot to port this system to fit their needs.
If your investment thesis is based at least in part on BlackBerry's continued dominance in automotive operating systems, then please consider the information provided in this note.
Disclosure: I am/we are long BB.
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.
Additional disclosure: I am currently long $BB. I recently closed out both a long and short position. (Called "shorting against the box".) I will likely go short again if $BB approaches $11.