BlackBerry’s QNX Auto Bets Are Coming To Fruition, But Will They Be The Next Big Thing For The Company?

by Trefis Team
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BlackBerry (NYSE:BB) posted a stronger than expected set of Q2 FY’19 results on Friday, September 28, driven by a stronger performance of its QNX business, which is seeing increasing traction beyond its core automotive infotainment market. Revenues from BlackBerry’s technology solutions business, which includes QNX, fleet tracking, and other emerging bets, saw revenues grow by about 29% year-over-year to $49 million and by about 4% sequentially. Below, we take a look at how the automotive operations are faring and what it could mean for BlackBerry’s turnaround.

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Automotive Software Operations Grow

BlackBerry indicated that the QNX business grew on multiple fronts over Q2. While revenues from the bread-and-butter infotainment market grew year-over-year, the company noted that non-infotainment operations such as ADAS (Advanced Driver Assistance Systems), and instrument cluster expanded at an even faster pace, although the base is likely to be much smaller. BlackBerry also made some meaningful progress on the business development front. The company saw a design win to provide technology for the next-generation digital cockpit for a multi-national auto OEM via one of its Tier 1 partners. Separately, it bolstered the number of qualified worldwide channel partners for QNX to 48, which represents a 20% increase from the start of the fiscal year. BlackBerry also indicated that it was going to step up its investments in the QNX space, recruiting more engineers worldwide.

Although The Business Is Lucrative, It Could Take Time To Scale Up 

BlackBerry’s focus on connected cars and next-generation autonomous vehicles could be much more lucrative compared to its automotive information and entertainment system licensing operations. For instance, the infotainment business is only estimated to bring in between $1.50 to $5 per vehicle. In comparison, BlackBerry previously indicated that it could garner between $5 to as much as $25 per vehicle as it expands into more sophisticated automotive technologies. That said, it could take time for the company to see revenues from this business ramp up significantly. For instance, BlackBerry indicated that the current spurt of revenue growth was driven by royalty payments from deals it won two to three years ago. It’s possible that the recent wins are also likely to be part of a longer-term process for the company, as it needs to go through the stages of the design win, development, adoption and product shipment before it can earn meaningful royalties.

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