BofA: BlackBerry's Cylance Acquisition Excites, But There's No Fire In Spark Platform

BlackBerry Ltd BB reiterated its Enterprise of Things, or EoT, strategy at its analyst day in San Ramon, California. 

While there was excitement around the acquisition of software company Cylance, the developments around the Spark EoT platform are underwhelming, according to Bank of America Merrill Lynch.

The Analyst

Daniel Bartus maintains an Underperform rating on BlackBerry which an unchanged $8.50 price target.

The Thesis

Bartus shared two main takeaways from the investor event in a Thursday note.

The first: BlackBerry needs to increase spending to compete effectively as a subscale cybersecurity vendor. Second, integrating technologies into a compelling platform is still a longer-term and challenging goal for the company. 

The analyst also expressed concern around the licensing segment’s growth trajectory.

During the analyst day, BlackBerry focused on the Cylance acquisition and its plans to leverage artificial intelligence across the EoT platform, Bartus said. 

While the intention is to integrate BlackBerry’s unified endpoint management and Cylance’s endpoint security in the longer run, the company is being cautious to avoid disrupting Cylance’s growth prospects, which are pegged at around 28 percent for 2020, the analyst said. 

“We walked away with a positive view of Cylance’s technology and endpoint expertise, but flag higher expenses, cash burn, and execution risks, which may linger through FY21." 

Referring to the developments around the Spark EoT platform, Bartus said they were underwhelming given “the lack of clarity, no tangible use cases, and unrealistic demos.”

Price Action

BlackBerry shares were down 0.79 percent at $8.84 at the time of publication Thursday. 

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Photo courtesy of BlackBerry.