Born-again BlackBerry: Canadian icon hopes to ride trucks to growth

Titanium Transportation (Canada)

09/06/2017 13:00

By Alastair Sharp 
    BOLTON, Ontario, June 9 (Reuters) - A visit to trucking firm 
Titanium Transportation  TTR.V  helps explain why BlackBerry's 
 BB.TO  stock is once again a darling in Canadian markets, 
having soared 70 percent in two months.  
    Nestled in an industrial area some 50 kilometers north of 
Toronto, the trucker is an early adopter of a new BlackBerry 
fleet-tracking service known as Radar, which uses $400 boxes to 
collect and transmit information on movement, temperature and 
physical contents of Titanium's 1,300 truck trailers. 
    Efficiency gains tied to Radar should allow Titanium to get 
maximum utilization of its fleet, positioning it to cut the 
number of trailers by five percent and also reduce labor costs, 
company executive Marilyn Daniel told Reuters. 
    "Time is everything in our world," she said. "Being able to 
tell a driver where exactly a trailer is as opposed to having a 
driver search through a yard for sometimes hours has been a 
definite improvement."  
    Radar is emblematic of BlackBerry Chief Executive John 
Chen's strategy for turning around the Canadian icon, by 
steering the company away from consumer electronics and back to 
its roots of selling products to businesses.  
    Beyond Radar, BlackBerry is also betting on other types of  
software for industrial customers. It is leveraging its QNX 
subsidiary's software foothold deep inside car infotainment 
consoles to expand into self-driving technology, while promoting 
its cyber-security software and services to thwart increased 
threats from hacking.  urn:newsml:reuters.com:*:nL1N1J40QC 
    BlackBerry's stock rallied after it showed signs of progress 
in quarterly earnings results at the end of March, followed by 
news in April of a nearly $1 billion cash windfall from 
arbitration with Qualcomm expected to fund future investments in 
growth. That comes in the face of an expected revenue decline to 
below $1 billion this year for the first time since 2004. At its 
smartphone peak, BlackBerry had annual sales of $20 billion. 
    Among the recent BlackBerry bulls are institutional 
investors such as Nokota Management, which took a new position 
with almost 4.8 million shares in the first quarter, and 
Oppenheimer Funds, which added 3.3 million more shares to its 
existing 4 million share stake, according to U.S. securities 
filings.  
    Iridian Asset Management and Connor, Clark & Lunn Investment 
Management, two of BlackBerry's biggest shareholders, each 
raised their stakes by around a quarter as of the end of March.  
    Nokota did not respond to requests for comment, while the 
others all declined to discuss their stakes in BlackBerry.    
     
    "HOPE AND PROMISE" 
    The strategy is not without risks. BlackBerry faces 
challenges entering the telematics market, where analysts say 
rivals include Omnitracs, Teletrac Navman  VCRCPM.UL , Tomtom NV 
 TOM2.AS , Trimble Inc  TRMB.O  and U.S. telecommunications 
giant Verizon Communications Inc  VZ.N . Verizon last year paid 
some $2.4 billion to buy GPS vehicle tracking firm Fleetmatics 
Group Plc.  
    Radar "is not a unique and earth-shattering product," said 
Nicholas Farhi, a partner at OC&C Strategy Consultants who 
advises companies on optimizing logistics operations. 
    That's why some investors advise caution, saying it is too 
soon to figure out how to properly value the new BlackBerry 
offerings. 
    "It's not the type of situation you can justify from a 
valuation standpoint," said Tim Ghriskey, chief investment 
officer at Solaris Asset Management, which manages more than 
$1.5 billion and exited the stock a decade ago, when BlackBerry 
phones were still dominant. "It is all about hope and promise." 
    And yet hope and promise among BlackBerry investors were 
hard to come by in the aftermath of Apple and Samsung walking 
away with the consumer hand-held phone business. 
    Since taking the company's helm in 2013 to attempt a 
turnaround, Chen has turned to technology products used inside 
automobiles and corporate cyber security services, in addition 
to targeting the gritty trucking industry with Radar. 
    He also bolstered the company's ability to manage rival 
devices in the workforce - still the single largest contributor 
to sales - with the purchase of rival Good Technology in 2015. 
And he outsourced production of handsets last year, meaning the 
company receives a cut from any devices sold by its partners 
rather than carrying the risk and revenue on its own books. 
    With Radar, BlackBerry enables customers to track trailers 
across country, and drivers can quickly locate vacant trailers 
scattered across vast parking lots. Previously, where drivers 
had to walk around those lots, banging on trailers in search of 
a hollow sound indicating it was empty. 
    BlackBerry charges $10 to $20 per month for every trailer 
connected to Radar, a product that an analyst at investment bank 
Macquarie says could play a pivotal role in a more than doubling 
of BlackBerry's sales by 2020.   
    Sandeep Chennakeshu, president of the BlackBerry Technology 
Solutions unit that oversees Radar, told Reuters that large 
package delivery firms and big carriers of lumber and home goods 
are among the more than 50 companies testing it. 
    "It really depends on us convincing our customers to try our 
solution," he said. "Once they try it, we're very confident 
they'll see the benefit." 
    BlackBerry says that it is targeting some 16 million to 20 
million trailers, chassis, vans, refrigerated units and piece of 
construction equipment for the Radar service, with a new variant 
on the hardware due to launch later this year.     
    On its last earnings call, the company named Trailer 
Wizards, a Canadian trailer rental and storage company with 
25,000 trailers, as its third Radar customer. 
    AT&T  T.N  will supply needed cellular connections for Radar 
in North America, and a second carrier is lined up to provide 
such services when it expands to Europe and Asia, Chennakeshu 
said. 
    The company expands Radar's functionality with quarterly 
updates. The next one will tell customers if a trailer is a 
quarter, half or three-quarters full and improve integration 
with warehouse inventory management systems, he said. 
    The Radar boxes can send alerts when a trailer door is 
opened, its internal temperature goes beyond a set range, has 
been emptied or travels through a specific geography, features 
which Chennakeshu said are attractive for tightly-regulated 
movers including pharmaceutical companies. 
    Raymond James analyst Steven Li forecasts that 8 million 
trailers will be equipped with Radar by fiscal 2020, generating 
annual revenue of $80 million. 
    Macquarie analyst Gus Papageorgiou is even more bullish, 
saying combined hardware sales and subscription fees could hit 
$540 million in fiscal 2020. 
    "The best is yet to come for BlackBerry," said Paul Rivett, 
president of Fairfax Financial, the company's second largest 
shareholder and owner of BlackBerry debt that can be converted 
into shares at $10 a piece in late 2020.  
    "Its future earnings growth as a software company is only 
starting to be understood," said Rivett. 
 
 (Additional reporting by Tim McLaughlin in Boston; editing by 
Jim Finkle and Edward Tobin) 
 ((alastair.sharp@reuters.com; +1 416 941 8118; Reuters 
Messaging: alastair.sharp.thomsonreuters.com@reuters.net)) 
 
Keywords: BLACKBERRY RECOVERY/