John Chen has spent almost five years trying to transform BlackBerry Ltd. from an ailing manufacturer of smartphones to a provider of enterprise software and services − and getting the market to believe he’s delivering. Mr. Chen, BlackBerry’s chief executive officer, is still telegraphing that message today. “There are a lot of opportunities yet to be executed,” he said in a fireside chat hosted by the Empire Club of Canada in Toronto on Wednesday.
The Waterloo, Ont.-based company now has a wide variety of projects under way touching on multiple industries, but Mr. Chen has a simple way of thinking about BlackBerry’s business.
“If you look at the trend of the industry, there’s two things happening. Number one is, everything wants to talk to everything,” he said, referring to the proliferation of smart devices known as “the internet of things.” “But they want to talk in a way that’s controlled by privacy and security.”
Blackberry executive chairman and CEO John Chen walks the floor of the New York Stock Exchange on Oct. 16, 2018.BRENDAN MCDERMID/Reuters
Mr. Chen said BlackBerry is well positioned to lead in this area, owing to its roots in communication infrastructure and data encryption. “There is no other company today focusing on that particular problem, nor is there any company that has the birthrights, other than BlackBerry,” he said.
The company has made strides to pivot its business in the past few years. Approximately 90 per cent of its revenue in the last quarter came from software and services, and 81 per cent of that revenue is recurring, which the company has said is a more predictable earning stream. BlackBerry outsourced manufacturing of its handheld devices in 2016, and that division amounted to only US$5-million in revenue in the last quarter, down from US$16-million in the same period last year.
The market has rewarded BlackBerry for its efforts, and its U.S.-listed shares have returned roughly 20 per cent over the past five years. Still, the stock performance significantly lags that of other technology companies, such as Apple Inc. and Microsoft Corp.
Mr. Chen acknowledged on Wednesday that progress in some areas has taken longer than anticipated, such as hitting US$100-million in revenue from its BBM messaging service. “I would agree that it hasn’t developed its potential yet,” he said. “The speed is not as good as we would have wanted.” He added, however, that the messaging service is “not too far away” from meeting its revenue target.
The automotive industry is also key for the company, Mr. Chen said. BlackBerry’s QNX platform is used in 120 million vehicles today, helping to power entertainment and navigation systems. The average revenue per vehicle earned by BlackBerry is between $3 and $5, but the company can increase that amount to between $10 and $20 by adding more services, Mr. Chen said.
This is partly why BlackBerry has invested in the autonomous-vehicle space. The company launched a research centre in 2016 and signed a deal in January with Chinese internet search firm Baidu Inc. to develop self-driving car technology, after similar agreements with other companies. Mr. Chen said Wednesday the primary barrier to widespread use of autonomous vehicles is not technology, but policy. “I really believe the policy and governments around the world, even in Canada and the United States, have definitely fallen behind,” he said.
Mr. Chen said he is optimistic about the company’s asset-tracking technology for transportation companies, known as BlackBerry Radar. The company disclosed on its last earnings call that the product’s revenue growth has been slower than expected, but Mr. Chen reiterated his goal on Wednesday of hitting US$100-million in cumulative revenue over the next three years.
He said there is potential to expand to the air cargo space as well. “Air Canada is one of the largest air transportation vendors,” he said. “So we’re focusing on doing some of that stuff.”
At the company’s annual general meeting in June, a majority of shareholders approved a compensation package for Mr. Chen that could score him more than US$400-million over the next five years, provided he hits certain performance goals, such as getting shares above US$30. BlackBerry closed at US$9.74 on the New York Stock Exchange on Wednesday.
Joe Castaldo