During BlackBerry's (NYSE:BB) latest conference call, CEO John Chen announced that the company will unveil new "advanced driver-assist technologies and solutions" at CES 2016 in January. Many new cars already use "semi-autonomous" systems to automatically apply the brakes or change lanes, but some automakers believe that fully autonomous cars will become a common sight on public roads within the next decade.
BlackBerry already owns QNX, an embedded OS for connected cars, and it recently partnered with IT company Luxoft (NYSE:LXFT) to develop a new semi-autonomous platform for vehicles. Chen told Bloomberg that this new platform could play a key role in Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Tesla's self-driving ambitions. Let's dig deeper into BlackBerry's driverless plans and see whether they can improve the smartphone and software maker's long-term outlook.
The business of QNX
There are currently two major embedded operating systems for connected cars -- QNX and Microsoft's (NASDAQ:MSFT) Windows Embedded. Back in January, IHS Automotive reported that QNX controlled over 50% of the market and that the OS had been deployed in more than 50 million vehicles worldwide. That number has since climbed to 60 million, according to QNX.
QNX and Windows Embedded shouldn't be compared to auto infotainment and dashboard mirroring platforms like Apple's CarPlay and Google's Android Auto. Instead, QNX and Windows Embedded connect those user-level software solutions to a car's hardware. Last December, BlackBerry scored a major victory over Microsoft when Ford replaced Windows Embedded with QNX to power its Sync 3 connected car platform.
IHS estimates that automakers only pay BlackBerry $3 per QNX-powered vehicle sold. That figure sounds paltry, but selling the OS into tens of millions of cars can help BlackBerry achieve its goal of generating $500 million in annual software revenues by the end of this fiscal year. That cumulative total had reached $373 million at the end of the third quarter. By building upon QNX's foundations with new services for autonomous vehicles, BlackBerry might squeeze out higher license fees per vehicle as the entire market grows.
How BlackBerry will beef up QNX
BlackBerry's new partnership with Luxoft will combine QNX with the latter's computer vision and object-tracking technology. Luxoft's computer vision and augmented reality software framework, CVNAR, can be adapted to an automaker's custom specs, sold as a ready-to-use solution for existing SoCs, or offered as a hardware-independent embedded solution for heads-up displays, LCDs, or AR glasses.
In a press release, QNX business development chief Andrew Poliak declared that Luxoft's technology was "well-suited to help automotive OEMs and Tier 1 (suppliers) as they progress from discrete ADAS (advanced driver assistance systems) implementations to more integrated solutions". QNX also recently annonced a deal with start-up AdasWorks to create "intelligent, multi-camera surround-view systems" for autonomous vehicles.
Since Apple CarPlay and Android Auto both already run "on top" of QNX, these more advanced features could tether iOS and Android users more tightly to BlackBerry's hidden OS and further extend BlackBerry's lead over Microsoft in connected cars.
What this means for BlackBerry investors
Last quarter, BlackBerry's software and services revenue rose 183% annually to $162 million, supported mainly by its enterprise mobility platform BES (BlackBerry Enterprise Service), messaging service BBM (BlackBerry Messenger), and QNX. Its recent purchases of alert system AtHoc and mobile device management vendor Good Technology have further expanded that software portfolio. BlackBerry hopes that after hitting $500 million in software and service revenues this year, the segment's annual sales can grow at least another 14% next year.
However, software and services still only accounted for 29% of BlackBerry's third quarter revenue. 40% still came from sales of its smartphones and 31% came from their service access fees. Sales at both businesses plunged and caused BlackBerry's total revenue to slide 30% annually.
But looking ahead, Lux Research believes that the value of the self-driving market car market could surge from $0.5 billion in 2014 to $87 billion by 2030. QNX will likely only claim a small percentage of those overall revenues, but that small percentage could significantly boost BlackBerry's software sales and reduce the weight of phones and access fees on its top line.