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Why BlackBerry Stock Popped 14% Today

By Rich Smith - Jan 19, 2021 at 11:01AM

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BlackBerry ends its legal feud with Facebook -- but what did BlackBerry get out of it?

What happened

Shares of BlackBerry Limited (BB -2.00%), the once smartphone maker that has transformed into a security software specialist, are soaring Tuesday morning -- the first trading day after Bloomberg reported, Friday after close of trading, that BlackBerry has settled a legal dispute with Facebook (FB 1.18%) over the subject of patent royalties.  

As of 10:35 a.m. EST, BlackBerry stock is up 14.4%.

Two lawyers shaking hands over a desk with a gavel and scales in the background

Image source: Getty Images.

So what

Quoting a BlackBerry spokeswoman, the news agency reports that BlackBerry has "resolved our disputes pursuant to a confidential agreement and have no further comment." Facebook also declined to comment.

BlackBerry sued Facebook in 2018, alleging Facebook was using BlackBerry-patented inventions in its instant messaging services -- sparking a legal challenge from Facebook to invalidate those patents, and a counterclaim accusing BlackBerry of infringing Facebook's tech.

Now what

It's unknown at present exactly how all this shook out in the settlement. Investors in BlackBerry will be hoping that Facebook has withdrawn its claims against BlackBerry, and that it has agreed to pay the company royalties on its tech (without BlackBerry having to pay royalties of its own).

BlackBerry could certainly use the cash. Through the first three reported quarters of last year, the company's sales declined 10% year over year, and net losses increased seven-fold to $789 million. Although the company is free cash flow positive at present, it's touch and go -- just $25 million in free cash flow, and just $2 million in positive FCF, if you deduct spending on "intangible assets" (which is an ongoing business expense for BlackBerry).

With the profitability of the company at stake, investors will be watching the outcome of this litigation settlement closely.

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Stocks Mentioned

BlackBerry Stock Quote
BlackBerry
BB
$5.89 (-2.00%) $0.12
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
FB
$193.54 (1.18%) $2.25

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