I'm starting off 2018 with the same stock I spent the last quarter of 2017 discussing repeatedly: Blackberry (BB) .
This truly has become a company that has reinvented itself, from handheld, mobile communications to cyber-security and self-driving automobiles.
Blackberry made a huge splash recently when it announced it would be working with Baidu (BIDU) to accelerate the deployment of self-driving technology for automotive manufacturers and parts suppliers. This comes on top of several other strong partnerships announced in 2017.
BlackBerry's QNX division has developed its Hypervisor 2.0 to run complex computer systems in vehicles, and Baidu plans to utilize this operating system as the backbone for Apollo, its self-driving platform. Baidu believers the Apollo platform will enable carmakers to leap from prototype to production system.
For its part, Blackberry appears drawn to Baidu's advancement in Artificial Intelligence (AI) and deep learning. These advancements paired with their high-definition maps and BlackBerry's safety-critical embedded software and expertise in security will be crucial ingredients for autonomous vehicles, according to Blackberry.
The issues with autonomous vehicles revolve around cost and reality. Many don't believe self-driving cars will become reality in the near future. It's understandable that the companies investing in the technology believe it can become a reality. When you step back and look at all the major players in the self-driving car space, I'd argue the naysayers have trillions of dollars of market cap betting against them.
It's worth noting that as part of the latest agreement, BlackBerry and Baidu will also combine Baidu's smartphone integration software for connected cars and its AI system to run on the BlackBerry QNX Platform.
Last quarter, the company reported stronger-than-expected earnings, posting a profit of $0.05 a share, which exceeded analysts' expectations by $0.03. The company also targeted a revenue range of $920 million to $950 million for fiscal 2018, above Wall Street estimates of $919.5 million.
Furthermore, the company sees positive cash flow for the year along with software and services revenue growth of 10% to 15%. That software and service revenue came in at $196 million this past quarter, dominating the total $249 million in revenue the company posted in the second quarter. Perhaps most encouraging when trying to rationalize the $5 billion valuation in a name somewhat reinventing itself is the strong cash balance of $2.5 billion at the end of the quarter.
In 2016, BlackBerry announced a deal with Ford (F) , but details of the agreement remain scant and appear to be mostly focused on vehicle entertainment systems. The company has other deals outside of Ford and Baidu worth noting. Recently, BlackBerry expanded its relationship with Titan Transportation Group to supply Titan's fleet of flatbeds with Radar L, BlackBerry's new asset and fleet tracking product. This is a step in the right direction.
The system collects real-time information such as load status, temperature, humidity and pressure information, which is then stored securely on a cloud platform. This allows for Titan to build and view reports designed specifically for managing its fleet. From here, I could envision a simple crossover into A.I. with this data (perhaps something done with Baidu) in order for Titan, or companies like it, to optimize the performance of their fleet.
Outside of Baidu, I see Aptiv (APTV) as the other big deal in the self-driving space for Blackberry. Aptiv and BlackBerry will be working together on autonomous cars. From a self-driving car standpoint, I'm more drawn to Aptiv as the company will have some $12 billion in revenue already given the other business it does in the electronic safety systems and electrical backbones of vehicles, but this is a major step for BlackBerry in a potentially high growth industry. Of course, it will face competition from heavyweights Intel (INTC) , Nvidia (NVDA) and Micron (MU) .
Lastly, BlackBerry signed its first BlackBerry Secure licensing deal with Yangzhou New Telecom Science & Technology company. Making a move into smartphone security via licensed software to an OEM is another new step in the right direction, as the company pursues organic growth. These phones will be embedded with BlackBerry's proprietary software and applications.
All in all, Blackberry has come a long way from the company the name is traditionally known for, and I believe 2018 will begin the start of a long upward trend for shares over the next few years. To me, this name looks as though it could easily double in the next two to three years, although given the new technology of self-driving cars, investors should expect volatility and use that as a method of entry into shares.