Over the past decade, BlackBerry (BB 2.42%) has reinvented itself as a cybersecurity and Internet of Things (IoT) software company to offset its loss of the smartphone market to Apple and Alphabet's Google. To accelerate that transformation, BlackBerry stopped manufacturing its own first-party hardware in 2016, bought the cybersecurity company Cylance in 2019, divested some of its weaker businesses, and nurtured the growth of QNX -- which it acquired back in 2010 -- as the world's leading embedded operating system (OS) for connected vehicles.
That turnaround plan prevented BlackBerry from going bankrupt, but its stock has been cut in half over the past decade. It's also trading 97% below its all-time high of $147.55 in 2008 when its brand was still synonymous with smartphones.
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Yet we shouldn't view this new BlackBerry with the same lens as the old BlackBerry. Instead, today's BlackBerry should be compared to other cybersecurity companies like CrowdStrike (CRWD 4.56%) since its cybersecurity portfolio generated 63% of the company's revenue in fiscal 2024 (which ended on Feb. 28).
So can BlackBerry keep growing and become as important as CrowdStrike, which Cylance competes against in endpoint cybersecurity services? Let's take a closer look.
NYSE: BB
Key Data Points
The key differences between BlackBerry and CrowdStrike
BlackBerry's Cylance and CrowdStrike both monitor network endpoints for potential threats with a mix of AI tools and human analysts. The key difference is that Cylance deploys its services through on-site appliances and cloud-based services, while CrowdStrike only delivers its services through the cloud, which it claims is simpler, cheaper, and easier to scale.
Cylance uses minimal system resources compared to CrowdStrike and other larger endpoint security platforms. CrowdStrike uses up more resources but provides a more user-friendly interface for IT professionals. CrowdStrike's new generative AI chatbot Charlotte further simplifies that system with natural language commands.
BlackBerry's entire cybersecurity business, which generates most of its revenue from Cylance, only brought in $418 million in revenue in fiscal 2024. That represents a 12% decline from its $477 million in revenue in 2023. It mainly blamed that slowdown on the macro headwinds which drove companies to rein in their software spending.
However, CrowdStrike faced the same macro headwinds and still grew its revenue by 54% to $2.24 billion in fiscal 2023 (which ended on Jan. 31). For 2024, it expects revenue to rise another 34% to 36%. Analysts expect CrowdStrike's top line to grow at a compound annual growth rate (CAGR) of 30% from fiscal 2023 to fiscal 2026, which implies its annual revenue could more than double to $4.91 billion in just three years.
BlackBerry only expects its total revenue to increase at a CAGR of 12% to 15% between fiscal 2023 to fiscal 2026, driven by a 9% to 12% CAGR for its cybersecurity business and an 18% to 22% CAGR for its IoT business. But even at the high end of that forecast, BlackBerry's revenue would only rise from $656 million in fiscal 2023 to about $1 billion in fiscal 2026.
That outlook isn't too grim, but it reveals that BlackBerry's cybersecurity business won't come anywhere close to matching CrowdStrike's over the next few years. It also suggests that BlackBerry will rely more heavily on the secular expansion of the connected vehicle market -- which should drive more automakers to install QNX in their vehicles -- and unpredictable patent sales to offset the slower growth of its cybersecurity business.
Let's not compare apples to oranges
BlackBerry's Cylance competes against CrowdStrike in the endpoint security market, but this underdog can't be seriously compared to the market leader yet. CrowdStrike generated nearly five times as much revenue as BlackBerry's cybersecurity business last year, and it will likely grow more than twice as rapidly over the next three years.
BlackBerry might hold more appeal to value-seeking investors than CrowdStrike since it only trades at three times this year's sales while its higher-growth rival has a comparable ratio of 12. But let's not compare an apple to an orange, since BlackBerry probably won't be seriously mentioned in the same breath as CrowdStrike anytime soon.
