Back in 2010, BlackBerry (BB 4.91%) accounted for 43% of the smartphone platform market, according to Comscore. But over the following decade, it lost the entire market to Apple's (AAPL 0.68%) iPhones and Alphabet's army of Google Android devices.
BlackBerry stopped manufacturing its own smartphones in 2016, licensed its brand to third-party Android device makers, and expanded its enterprise, security, and embedded software businesses. That strategic shift kept the company relevant even as its iconic smartphone brand faded away.
Today, Apple is the world's second largest smartphone brand after Samsung. It claimed 14% of the global smartphone market in the third quarter of 2021, according to Counterpoint Research. It also produces iPads, Macs, and other devices, and it ended its latest quarter with 785 million paid subscribers across all of its services.
But BlackBerry isn't down for the count yet. Its QNX operating system still powers most of the world's connected vehicles, and it continues to expand its cybersecurity and Internet of Things (IoT) businesses. Could this dethroned tech king stage a comeback this year and outperform Apple?
BlackBerry is betting big on connected vehicles
BlackBerry's revenue rose 15% in fiscal 2020, which ended in February of the calendar year, with most of that growth coming from its $1.4 billion acquisition of the cybersecurity firm Cylance in early 2019. It subsequently integrated Cylance into its Spark Suite of security software and services.
However, the pandemic started to impact the BlackBerry Technology Solutions (BTS) business, which houses QNX, at the end of fiscal 2020 by disrupting the automotive market's shipments of new connected vehicles.
In fiscal 2021, BlackBerry's revenue declined 14% after it lapped its acquisition of Cylance and struggled with the pandemic's ongoing impact on the auto industry. On an organic basis, its security business also grew at a much slower rate than cybersecurity leaders like Palo Alto Networks and CrowdStrike.
In the first nine months of fiscal 2022, BlackBerry's revenue fell 22% year over year as supply chain challenges throttled the automotive market's recovery. Those headwinds, which BlackBerry expects to continue this year, offset the stabilization of its cybersecurity and IoT software divisions.
On the bright side, BlackBerry continues to score new design wins for QNX, while its development of IVY -- which will integrate QNX with Amazon Web Services (AWS) in vehicles -- remains on track. It's also gradually expanding Cylance's cybersecurity services into connected cars.
But for now, analysts expect its revenue to decline 20% to $718 million for the full year with a net loss of $196 million as it slogs through those challenges. They expect its revenue to rise 11% to $797 million in fiscal 2024 but its net loss to widen again to $228 million. That's a wobbly outlook for a company which ended last quarter with a net cash position of just $407 million.
Apple is still firing on all cylinders
Apple's revenue rose just 6% in fiscal 2020, which ended in September of the calendar year, as its iPhone sales decelerated. But in fiscal 2021, its revenue jumped 33% as it rolled out its first family of 5G iPhones. Its total iPhone sales surged 39% for the year and accounted for over half of its top line.
Unlike BlackBerry, Apple is consistently profitable and returns boatloads of cash to its investors. Its earnings per share grew 71% in 2021, and it repurchased $86 billion in shares and paid out $14.5 billion in dividends.
In the first quarter of fiscal 2022, Apple's revenue grew 11% year over year as its sales of iPhones and Macs continued to rise. Its services revenue, which accounted for 16% of its top line, also improved 24% year over year as Apple Music, Apple TV+, Fitness+, and other services locked in more than 165 million new subscribers in the past 12 months alone.
For the full year, analysts expect Apple's revenue and earnings to grow 7% and 8%, respectively, against a tough comparison to the iPhone 12's launch in fiscal 2021. But looking further ahead, investors should expect Apple to roll out new products -- including AR devices, services for connected vehicles, and more -- to further diversify its business away from the aging iPhone.
Apple ended its latest quarter with $203 billion in cash and marketable securities, so it can easily afford to make big investments or buy smaller companies to accelerate those efforts. Apple's cash hoard will also insulate it from rising interest rates, which will likely hurt unprofitable companies (like BlackBerry) by boosting their borrowing costs.
The valuations and verdict
BlackBerry's stock can't be valued by its earnings yet, and it doesn't look particularly cheap at six times next year's sales, especially considering its growing dependence on the sluggish auto market, its competitive headwinds in the cybersecurity market, and its ongoing losses in a market rattled by rising inflation and higher interest rates.
Apple also isn't a value stock at 28 times forward earnings and seven times this year's sales, but the stability of its core businesses, its massive cash flows, its sticky ecosystem, and its wide moat all justify that slight premium. Therefore, I believe Apple will easily outperform BlackBerry again this year.