Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How BlackBerry Pivoted From Phones to Cybersecurity
Transcript
- Lucas: A decade ago, if you heard the name BlackBerry, you thought of a keyboard phone that couldn't keep up with the iPhone. Today, BlackBerry is a cybersecurity and embedded software company. And here's the number that stopped me: that business generated over $800 million in revenue last fiscal year, with gross margins above 70 percent. Luna: Wait — the company that made the phone with the little trackpad is now a pure software play? How did that happen without anyone noticing? Lucas: It's one of the quietest turnarounds in tech history. And to understand it, you have to start at the bottom. In 2011, BlackBerry — then called Research In Motion — had a market cap of over $80 billion. By 2013, they were losing a billion dollars a quarter. By 2016, revenue had cratered from $20 billion to just over $2 billion. Luna: That's a 90 percent decline in five years. Most companies don't survive that. Lucas: Most don't. But BlackBerry had two hidden assets. First, QNX — a real-time operating system they had acquired back in 2010 for $200 million. QNX was designed for mission-critical systems where a crash isn't an option: think medical devices, industrial robots, and cars. Second, they had an enterprise security business that had always been the quiet side of RIM. Luna: So the phone was the shiny object, but underneath there was this industrial-grade software nobody knew about. Lucas: Exactly. In 2013, they brought in John Chen as CEO. Chen had a reputation for turning around troubled enterprise software companies — he'd done it at Sybase. His mandate was brutal: stop trying to save the phone business, cut costs, and focus on software. He cut 40 percent of the workforce in his first year. He sold off the consumer phone business to a Chinese company. And he doubled down on QNX and security. Luna: And that bet paid off. Today, QNX is in more than 250 million vehicles worldwide. It powers the digital instrument clusters and infotainment systems in cars from Ford, BMW, Volkswagen, Toyota. Lucas: That's the part most people miss. BlackBerry isn't a car company, but it's inside the car. QNX has a certification called ISO 26262 — that's a functional safety standard for automotive. It takes years to achieve. So once an automaker adopts QNX, switching costs are enormous. It's a classic installed-base moat. Luna: And then in 2018, they made a big bet on cybersecurity with the acquisition of Cylance for $1.4 billion. That gave them an ai powered endpoint security platform. Lucas: The Cylance acquisition was controversial. Critics said BlackBerry was overpaying for a company that was growing but not yet profitable. And in the short term, they were right — BlackBerry's stock didn't move much. But Chen's logic was that endpoint security was the natural extension of BlackBerry's legacy in secure mobile communications. The brand still had trust in enterprise IT departments. Luna: So they went from locking down phones to locking down laptops and servers. Lucas: Right. And here's where the numbers get interesting. By fiscal 2026, BlackBerry's cybersecurity business was generating about $450 million in annual recurring revenue. The IoT division — largely QNX — was doing about $350 million. Combined, the company is now worth about $1 billion in market cap. That's a fraction of the $80 billion peak, but it's a live company with positive free cash flow. Luna: And it's not a zombie. They have real growth. The IoT business is growing at about 15 percent year-over-year, driven by content from an exploding electric vehicle market. Lucas: That's the key. BlackBerry isn't just surviving — it's positioned in two growing markets. The global automotive software market is expected to be worth over $50 billion by 2030. And endpoint security is a $20 billion market today. They're not the leader in either, but they have a credible niche. Luna: Let's take a quick step back. Because this kind of pivot — from consumer hardware to enterprise infrastructure — is incredibly rare. Most companies that dominate a category can't let go. Kodak invented the digital camera but couldn't pivot away from film. Nokia had a smartphone operating system but couldn't abandon Symbian. Lucas: That's a good comparison. What made BlackBerry different? I think it's two things. First, the board gave Chen a very long leash. He started in 2013, and the stock didn't really work for years. But the board didn't panic. Second, Chen was ruthless about asset sales. He sold off the patents for $600 million in 2022. He sold the remaining phone brand licensing. He monetised everything that wasn't core to QNX and cybersecurity. Luna: And that allowed the company to operate debt-free. That's a huge advantage when you're trying to invest in R&D for long-cycle products like automotive operating systems. Lucas: Speaking of long-cycle — one of the things I find most impressive about the QNX story is how they built a developer ecosystem. In 2023, they launched QNX Everywhere, a program that gives developers free access to the OS for non-commercial use. That's a page straight out of the software playbook: get developers hooked early, and they'll push for your platform at their companies later. Luna: So the company that once locked down its own ecosystem — BlackBerry Messenger, the proprietary network — is now open-sourcing its core platform? That's a pivot within a pivot. Lucas: Exactly. And it's working. They now have over 500,000 developers registered on the QNX platform. Every one of those developers is a potential advocate inside a car company or a robotics firm. Luna: If these conversations have moved your work forward in some small way, it's worth mentioning that we keep these episodes ad-free by design. We don't run sponsor breaks or read banner scripts because we think the topic deserves your full attention. Lucas: And that's only possible because of listeners who choose to support the show directly. If that feels like a good fit for you, the link is buy me a coffee dot com slash fexingo. No obligation, no upsell. Luna: Okay, back to BlackBerry. So they've got the developer ecosystem, they've got the safety certifications, they've got the recurring revenue. But what's the big risk going forward? Lucas: I see two. First, competition in automotive software is heating up. Google's Android Automotive is making inroads. That's a full operating system stack, not just the real-time layer. BMW is already using Android Automotive for infotainment in some models. If automakers consolidate around a single platform, QNX could get squeezed out of the higher-level stack. Luna: But QNX owns the safety-critical layer. That's harder to displace. No one's going to trust Android with brake-by-wire or steering control. Lucas: True, but the line is blurring. Qualcomm, which makes the chips for many digital cockpits, is pushing its own integrated platform. And they're a partner but also a potential competitor. The second risk is that cybersecurity is a crowded space. CrowdStrike, Microsoft, SentinelOne — they all have more resources. BlackBerry's share of the endpoint market is small, around 3 percent. Luna: So the security business might not ever be a market leader, but it doesn't have to be. It just needs to be profitable and tied to the IoT story. If a car maker buys QNX for the dashboard, they might also buy BlackBerry's security suite for the overall fleet. Lucas: That's the cross-sell thesis. And it's plausible. In fact, John Chen has said the long-term vision is to provide the 'intelligent edge' — the secure software layer that connects devices to the cloud. That's a story that could command a higher multiple if they execute. Luna: So what does the next chapter look like? Chen is 71 now. There's been talk of succession planning. Lucas: That's the big unknown. Chen's contract was extended through 2027, but he won't be there forever. The new CEO will have to decide whether to keep the two businesses together or spin one off. Analysts have speculated that QNX could be worth $4 to $5 billion on its own if it were a standalone company. That's more than the entire current market cap of BlackBerry. Luna: So the sum of the parts might be greater than the whole. That's a classic activist investor scenario. Lucas: It is. And BlackBerry's board has already shown they're willing to unlock value — they sold the patents. So a spin-off or sale of the IoT business isn't out of the question. But for now, the company is a live case study in how to pivot when your core product dies. The lesson: find your hidden asset, protect it, and be willing to abandon the brand that made you famous. Luna: It's a tough pill to swallow. The BlackBerry name was synonymous with business productivity. To let that go and become a company that most consumers have never heard of — that takes real discipline. Lucas: It does. And it's a reminder that a pivot isn't about chasing the next shiny thing. It's about looking at what you already have that the market is about to value differently. BlackBerry had QNX in 2010. It took them 15 years to make it the center of the company. That's patience, not genius. Luna: I think that's the right note to end on. Next time you're in a car and the infotainment screen boots up instantly, you might just be using a piece of BlackBerry history without knowing it. Lucas: And that's the quietest kind of comeback.