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BlackBerry Ltd. plans to split itself in two by spinning its connected-car software business into a separate public company in an attempt to revive investor interest in the one-time smartphone leader.

The Waterloo, Ont., company said splitting into two separate public companies would give shareholders a chance to “more clearly evaluate” the performance and potential of each on a separate basis and pursue separate strategic and financial paths. It plans to spin out the connected car, or internet of things, business in the first half of its next fiscal year, which begins next March 1.

“The board and management believe that separating our principal businesses will improve our ability to create value for all our stakeholders,” BlackBerry executive chair and CEO John Chen said in a statement on Wednesday. The company said its strategic review wasn’t finished, which means it could sell off some or all of the remaining parts of its business.

This is a pivotal year for BlackBerry. The company announced the sale of most of its legacy smartphone-related patents to Dublin’s Key Patent Innovations earlier this year. That ended a period of several years in which BlackBerry generated hundreds of millions of dollars in high-margin revenue extracting licensing fees from other companies for alleged use of its intellectual property.

This fall, Mr. Chen comes to the end of a five-year contract and the company faces repayment of US$365-million in debentures.

Mr. Chen has spent nearly 10 years as CEO. In the first part of his tenure, Mr. Chen was successful in transitioning the company completely out of the smartphone business and cutting costs while securing its future as a continuing company. He was aided by billions of dollars in legacy high-margin service-fee revenue negotiated by his predecessors with carriers when BlackBerry handheld devices were in hot demand, and which continued to pour in for years – albeit at a steadily declining rate – as customers continued to use its aging devices.

But Mr. Chen has since delivered little payoff for shareholders. BlackBerry’s shares have languished for years – except for a brief spike when it became a “meme stock” in 2021 – and are trading at roughly the same level they were 24 years ago when its wireless e-mail device was the hottest tech gadget in the world.

BlackBerry had under Mr. Chen become a hodgepodge of different businesses mostly picked up through acquisitions. It is a provider of in-car software to connect vehicles to the internet. It also sells cybersecurity software and provides device management software used by corporations to manage the fleets of devices used by their employees. Along with its patent-licensing business, it was an odd duck of a company with no peers in terms of its eclectic mix of businesses.

The cybersecurity business has been a disappointment. It has delivered far less growth than expected. BlackBerry is a leader in the device management business, but it is a crowded, mature niche sector.

The company’s jewel is its connected-car business, managed out of its QNX division in Ottawa. BlackBerry bought QNX in 2010 when it was still a leading smartphone maker. QNX was initially tasked with developing software for the company’s ill-fated operating system used in its Playbook tablet and family of smartphones launched in 2013, which failed to reverse the company’s quickly fading market share against phones powered by Apple and Android operating systems.

QNX had more success developing software used to connect cars to the internet; the division is expected to deliver 20-per-cent annual growth for years, far more than BlackBerry’s cybersecurity business. Its technology is in more than 235 million cars and used all of the world’s top 10 automakers.

But BlackBerry recently announced disappointing revenues for both divisions and cut its revenue forecast for the connected-car division to US$225-million to US$240-million for the year, mainly due to delays in project implementation and reorganizations at some carmakers. BlackBerry has said it expects QNX revenue to hit an all-time high in its fourth quarter and for momentum in the QNX division to ramp up next year.

BlackBerry’s release did not state what role Mr. Chen would play in either company or if the head office of the connected car business would be located in Ottawa.

The announcement follows a strategic review launched in May that saw the company hire investment banks Morgan Stanley and Perella Weinberg Partners to provide advice on possible alternatives to increase shareholder value.

The review was announced after British hedge fund Fifthdelta Ltd. accumulated just under 10 per cent of its shares. Fifthdelta has made other investments in the internet-of-things space, suggesting it is interested in BlackBerry’s connected car business. The hedge fund has publicly supported the strategic review process.

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