Blackberry's refusal to give up

In the realm of investing, conviction plays a crucial role, separating the successful from the faint-hearted. With a track record of identifying multibaggers like Palantir and AMD during the recent bull market, I've had my fair share of triumphs. However, one particular high-conviction turnaround thesis has not yielded the desired results. It's been almost nine months since I began taking a position in Blackberry, and it's time to assess the progress made under the new CEO. It’s probably too early to assess the new CEO, but at least it definitely feels like there is someone at the helm, taking care of things that were left hanging for a long time. 

Positive Developments:

1. Distinct Divisions, Renewed Energy:
   Blackberry now operates as two distinct divisions, with renewed energy visible in both. The QNX team showcased its vigor at CES, and it's encouraging to see the CEO providing them with the necessary space to flourish.

2. Cyber Sales Momentum:
   The Cyber sales division has exhibited renewed energy, with over 120 SMB market deals closed in the past year. This is a positive sign, indicating potential stabilization and maybe even a gradual growth in ARR. While Blackberry may not be a dominant player in a market saturated with giants like CrowdStrike and Palo Alto, its gradual awakening is noteworthy. The recent deal with the Malaysian government exemplifies this progress.

3. Significant QNX Deals:
   The QNX division has secured some pivotal deals, including the Stellantis agreement and the Foxconn consortium deal announced at CES. These partnerships reflect the division's strengths and potential.

4. Debt Restructuring and Reduction:
   Blackberry has successfully extended its debt wall to 2029, reduced debt by 45%, and oversubscribed debentures by 50 million. This indicates that I am not the only believer in the company's turnaround strategy.

5. Major Cost Restructuring:
   Blackberry has implemented significant cost restructuring measures, targeting annual savings of almost 150 million. Approximately 50 million worth of cost-cutting is already underway this quarter.

Areas for Improvement:

1. Board Changes and Transparency:
   The recent board changes, including the departure of key players like Prem Watsa, JC, and Tim Dattels, have raised some concerns. It appears as if a coup has taken place, and greater transparency regarding the intentions behind these changes is warranted.

2. Public Engagement by the CEO:
   I believe that increased engagement by the CEO in public forums would be beneficial. Sharing the turnaround story proactively, perhaps after the numbers clearly reflect positive progress by the end of the year, could enhance investor confidence.

3. Marketing Blackberry's Differentiating Factor:
   Blackberry's cyber division possesses a highly differentiating factor—a secure and impenetrable communication channel  that could be invaluable in the event of unforeseen incidents for any firm. This angle, however, does not seem to be marketed effectively. Positioning it as a complementary offering in every cyber deal including for competitors  could be a strategic move. Why wouldn't firms want the same emergency communication system as the US government?

Despite the challenges faced and stock being close to all time low, I believe Blackberry still has a road to success ahead.  This is a marathon and not a sprint, and is not a journey for the faint of heart. 

Disclaimer : This is not financial advice, so do your own due diligence before investing.