How BlackBerry Is Looking To Better Monetize Its Patents

Last week, BlackBerry (NASDAQ:BBRY) said that it had entered into an agreement with Teletry, a unit of patent licensing company Marconi Group, to sub-license its patents to global smartphone vendors. While BlackBerry says that it would own its patents, while continuing to operate its own licensing program outside of the sub-licensing agreement, the company could still see better monetization of its patent assets. Below we take a look at what the deal could mean for BlackBerry’s business.

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Deal Could Allow BlackBerry To Focus On New Monetization Avenues

BlackBerry has a significant amount of intellectual property that relates to technologies including core wireless communications, operating systems, networking infrastructure and cybersecurity. Besides the mobile phone industry, many of the company’s roughly 40,000 patents are geared towards areas such as secure communications and the Internet of Things. It’s possible that the new agreement will help BlackBerry to focus on expanding into new markets for patent licensing, while Teletry pursues new deals with smartphone vendors across the globe. Although BlackBerry has noted that it has about 80 people working in its internal patent licensing unit, the company has seen many high-profile departures recently, and the agreement could limit the company’s need to expand its headcount.

Licensing Revenues Have Been Volatile

The licensing business is very valuable to BlackBerry, as the revenue it books is likely to translate almost entirely into profit, given the limited marginal costs. This could be crucial to BlackBerry’s overall profitability, given that it has exited the handset unit, with revenues from the high-margin service access fee business also trending towards zero. However, revenues from patent licensing have been lumpy. For instance, BlackBerry has outlined about $100 million or so in IP revenue for FY’18. However, the company has already booked about $88 million in revenues in this segment over the first half of the fiscal year alone, driven by licensing deals with Ford, Blue, and Timex. This implies that revenues could decline to just $12 million over the second half of FY’18. However, by outsourcing the smartphone licensing business to Teletry, BlackBerry could potentially improve the stability of its revenues.

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