With repeated yearly losses this past fiscal year to the tune of $5.9 billion, the company once referred to as "Crackberry" has suffered a harsh withdrawal from the smartphone market, now barely holding onto 0.6% of the global share.
But, BlackBerry's (NASDAQ:BBRY) recent investment in billionaire Patrick Soon-Shiong's NantHealth signals that the company is on the move. With the move, BlackBerry will lessen its dependence on the smartphone market and instead leverage its core strengths to sell high-margin software in regulated industries such as health care, finance, government, and law.
BlackBerry's core strength
Even during its heyday in the smartphone market, BlackBerry's core strength was always enterprise services with a focus on a secure mobile infrastructure. BlackBerry may not be in vogue with consumers anymore, but its enterprise services are still favored by regulated industries with the strictest security needs. As CEO John Chen pointed out, this is why "seven out of seven G7 governments are also BlackBerry customers." This puts BlackBerry in a good position to continue targeting industries where security is at a premium. Complementing this security infrastructure is the powerful QNX.
BlackBerry's greatest asset: the QNX operating system
BlackBerry acquired QNX in 2010, which is an extremely fault-tolerant and resilient commercial operating system. As a result, it is favored in many "mission critical" industries that value durable technology. Another advantage of QNX is that it can control devices with embedded technology, like blood pressure monitors, ECG equipment, and patient monitoring devices, which makes it particularly well-suited for use in hospitals.
If the auto-industry is any indication of broader trends, QNX seems like it can be a powerful source of profit for BlackBerry. Earlier this year, Ford dumped Microsoft's automotive OS in favor of QNX, and Apple's CarPlay system, announced last month, also utilizes QNX. According to Paul Leroux at QNX:
Connectivity to smartphones and other mobile devices is a key strength of QNX Software Systems' platform for car infotainment systems, and many automakers and tier one automotive suppliers use our platform to implement smartphone/head-unit integration in their vehicles. We have a long-standing partnership with Apple to ensure high-quality connectivity with their devices, and this partnership extends to support for Apple CarPlay.
Following Mercedes-Benz, Ferrari, and Volvo, other auto manufacturers will also equip their future vehicles with Apple CarPlay. Gartner analyst Thilo Koslowski predicts that by 2020, 80% of new vehicles will have such an infotainment unit, which means that QNX could be a significant source of revenue for BlackBerry just in cars alone.
The future of health care
Soon-Shiong, CEO of NantHealth, hopes to utilize QNX technology to help revolutionize the health care industry. NantHealth provides cloud-based intelligent clinical operating systems that synchronize medical records and give doctors unprecedented access to real-time data, ensuring better medical decision-making and productivity. "The future of the health care industry requires the ability to share information securely and quickly, whether device-to-device or doctor-to-doctor anywhere and at any time," said Soon-Shiong.
With Blackberry's investment in NantHealth, the two companies will work together to develop a smartphone that caters to the needs of the health care sector, optimized for viewing CT scans and 3D images. BlackBerry's secure devices and QNX-embedded technology will allow NantHealth to improve and scale its cloud-based medical platform, "putting the power of a supercomputer in the palm of the caregiver's hand," as Soon-Shiong says. This can have profound effects in improving diagnoses and the efficiency of health care, which would mean big profits for BlackBerry.
What about the other guys?
According to BlackBerry's head of strategic planning, Jim Mackey, this new smartphone will be "available for all." Don't expect a mass of consumers flocking from Apple's iPhone and Google's (NASDAQ:GOOG) Android-powered devices to a new BlackBerry smartphone, as it doesn't seem like that's BlackBerry's intention.
There has been a lot of talk recently about Google Glass, and its potential uses in health care. Dr. John Halamka reckons Glass can help with administering medication, clinical documentation, and decision support. More recently, a health IT company even developed a tele-medicine platform with Glass as its centerpiece.
Earlier this year, Apple met with the FDA to discuss the possibility of mobile medical devices. Shortly after, the company hired experts from digital health start-ups.
It seems that Google and Apple are also very interested in disrupting the health care industry with their respective technologies. With BlackBerry's investment in NantHealth, though, BlackBerry gets the first-mover advantage, as well as a proven and capable partner in Patrick Soon-Shiong and NantHealth. BlackBerry's days of stale innovation may now be over, and with this renewed focus on core-strengths I would recommend it a hold.
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Haris Qureshi has no position in any stocks mentioned. The Motley Fool recommends Apple and Google-Class C Shares. The Motley Fool owns shares of Apple, Google-Class C Shares, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.