BlackBerry's (NSDQ:BBRY) turnaround has been moving at snail's pace. In that context, BlackBerry's deal with Ford (NYSE:F) to expand usage of its QNX software in the latter's line of connected cars was welcome news. Many see BBRY's focus on automotive technology as a potential profit center. Norwegian security firm, Promon, recently gave a demonstration of how Tesla (NSDQ:TSLA) cars can be stolen by hackers through the company's official android application, which many car owners use to interact with their vehicles. This was one of the latest unflattering events to take place for Tesla. But this very news can be good for Blackberry. Here's why.Connected Cars A Fast Growing Market
According to TechCrunch, BlackBerry's QNX division is one of the Canadian company's rare bright spots. The software maker's operating system is a key ingredient in the infotainment offerings of a large number of automakers (BlackBerry says it's currently running in over 60 million vehicles). A Wells Fargo analyst projects that QNX will generate $110 million in sales in fiscal year 2017 and hit $138 million the following fiscal year. These numbers don't seem to be big, but in the field of networked devices, the world's 1.1 billion or so cars are second only to the mobile phones. 'Connected ' cars are the next big thing after smartphones, so there is immense potential here.What QNX Offers
The latest product line of QNX includes :QNX PLATFORM FOR ADAS (advanced driver assistance systems): for auto safety, vehicle-to-vehicle communication, and a multi camera vision system. QNX Acoustics management platform: a software solution for management of audio signal processing in cars. QNX OS for safety: an operating system with an applied cryptography and a key management solution, which also includes end-to-end security.
This covers most of the software features on Tesla and other high end cars. Most customers probably already use QNX technology without knowing that they do. Like Ford, many car makers have infotainment systems which run on QNX. QNX has become very popular in the automotive industry.Looking Beyond The Ford Deal
The details of the BlackBerry's Ford deal are not known. However, this is the first direct deal with an automaker, which makes BlackBerry a Tier 1 supplier, whereas most of QNX's business with automakers previously has been through another links in the supply chain. On Ford cars, QNX replaced Microsoft's OS, which was prone to crashes. The new Ford deal will directly increase the volume of QNX based cars, adding more credibility to QNX. Consequently, this could be first of many such deals for BlackBerry.
There's no mention of automated driving in the Ford deal. However, QNX’s ADAS is participating in the first automated vehicle (AV) pilot program in Canada. BlackBerry's software may eventually feature in Ford's autonomous driving plans.
Linux OS, which is open source, is the closest competitor to QNX. QNX and Linux OS are projected to be market leaders in infotainment OS' in the future. The Linux OS has the advantage of being open source while QNX is a proprietary software. Tesla cars run on the Linux based OS. And though the recent Tesla car hack was not due OS vulnerabilities, an earlier hack reported was due to issues related to its web browser, for which Tesla also released an update over the air.
BlackBerry claims to offer the most secure, trusted and reliable platform that can power every aspect of connected cars. This makes a strong case for QNX to be considered by other automakers. With software becoming increasingly important to car manufacturers, the possibility of BlackBerry signing similar agreements with other car makers is very real.Tesla's Bad News Can Be Good News for BlackBerry
Now coming to the main point, earlier this year, there was news about researchers hacking Tesla cars twice. An unimpressive review of the Model X recently posted by Consumer Reports was another blow to Tesla, as it is a company which flourishes on its brand image and cult status. Apart from finding many faults in Tesla's Model X, Consumer Reports was critical about the Tesla's semi-autonomous driving package available on the Model X. It believes that stronger steps should be taken to ensure that these systems are safe.
All these events bode well for BlackBerry, as the latter is pitching its QNX OS as secure and reliable platform for 'connected' cars. With its own software for self-driving systems cleared, it makes a strong alternative for future autonomous vehicles. Whether it can take the fight to likes of Alphabet Inc (NSDQ:GOOGL), Apple Inc. (NSDQ:AAPL) and Tesla in autonomous vehicles software needs to be seen, but it does appear ready to give these tech giants a run for their money.
There were also reports of QNX powered vehicles being hacked in the past, but BlackBerry has come clean on it, as it was due to other components of the infotainment system. It is impossible to say that any car is hack proof, but BlackBerry, with security as its core competence would give more confidence to automakers as well as customers.
Moreover, the global connected car segment will be worth 39 billion euros by 2018. With the growing demand for software in the car industry, companies like BlackBerry can become acquisition targets for auto companies. The final part is pure speculation on our part. Tesla acquiring BlackBerry seems to be farfetched given its recent merger with SolarCity and its weak financial state. But a Tesla car with BlackBerry software could be a dream car for many customers.
Customers are also very much concerned about what software goes into their high end cars. In a recent tweet, a Tesla customer was disappointed on not receiving the latest software on his brand new Tesla, which incited a response from Elon Musk, stating that it will get rolled out incrementally. For the years 2016, 2017, and 2018 Tesla has missed sell side model targets. With its software updates also getting delayed recently,a BlackBerry Tesla deal would be great news for customers.
With BlackBerry's core competence in security and autonomous vehicle software, a greater synergy can be expected, given Tesla's hands-on autonomous driving software experience. This would also help Tesla sort out some of its software driven production issues, with BlackBerry concentrating on software. QNX claims to be platform independent. However, we don't really know how it will work with Tesla's present software, which is built on Linux OS.
A deal with Tesla, or an acquisition by any automaker for that matter would turn the fate of the BBRY stock investors. Also BBRY stock reacted well to Ford deal, at first. A Tesla BlackBerry deal may also be a good narrative for TSLA stock.
With 'connected' cars being touted as the next big thing after smartphones, automotive software could become the next 'mobile device' for BlackBerry, if it can demonstrate strong monetization capabilities for QNX.Looking for tech stocks? Check out Amigobulls' top tech stock picks, which have beaten the NASDAQ by over 111%.