BlackBerry Stock: Patent Sale Is Great but More Proof of Execution Required

Its looks like BlackBerry (BB) has finally found a home for its patents. On Tuesday, the one-time mobile phone maker turned software specialist announced that it had agreed a deal to sell substantially all of its non-core patents and patent applications to Malikie Innovations – a newly created subsidiary of intellectual property monetization company Key Patent Innovations.

The deal omits patents that are needed to support BlackBerry’s current core business but includes ~32,000 patents and applications associated mainly with mobile devices, messaging and wireless networking. The terms of the agreement dictate that Blackberry will get $170 million cash at the close of the deal, and by the third anniversary of closing, an extra $30 million in cash. With the inclusion of potential royalties, BlackBerry could rake in up to a total of $900 million.  

Obviously, the company believes the deal will give a boost to the balance sheet but it will also allow the simplified entity to focus more on its core IoT and Cybersecurity offerings.

To Canaccord analyst Michael Walkley, there’s no doubt the agreement is a good one. “We believe the deal could help unlock value and provide a capital infusion to drive accelerated software and services growth while improving BlackBerry’s net cash position,” the 5-star analyst explained.

Walkley thinks the transaction could close “relatively quickly or within six months.” However, is it enough to alter his stance? Not quite. “While management has created a cogent long-term strategy, and several parts of the business are turning the corner toward improving growth trends, we await more proof in execution on the new cybersecurity product roadmap, evidence of cross-selling opportunities emerging, growth in software and services revenue, and the potential for upside to our estimates before becoming more constructive on the shares,” the analyst went on to add.

To this end, Walkley reiterated a Hold (i.e., Neutral) rating to go alongside a $4 price target. What does it all mean for investors? Upside of a modest 6% from current levels. (To watch Walkley’s track record, click here)

Walkley’s thesis is in line with his Wall Street colleagues’ take; all 3 current reviews recommend staying on the sidelines, naturally culminating in a Hold consensus rating. The average target clocks in at $4.5, suggesting the shares will climb 24% higher in the year ahead. (See BlackBerry stock forecast on TipRanks)