BlackBerry Limited (BB.T) Enters Agreement with BMW Group for QNX

BlackBerry Limited (BB.T) announced today that it has entered into a multi-year agreement with BMW Group to collaborate and develop technology for the automotive manufacturer’s next-generation vehicles. More specifically, BlackBerry will license its QNX technology to BMW Group, as well as assign a team of engineers to support the development of new SAE Level 2/2+ driving automation functions to be deployed across multiple makes and models.

For starters, let’s talk about Blackberry QNX. BlackBerry QNX is a supplier of commercial operating systems, hypervisors, development tools, support, and services built for some of the world’s most critical embedded systems (CES). To put things into perspective, CES are systems in which failures can potentially be catastrophic. For example, critically embedded systems are commonly used for military, rail transportation, medical, industrial, aviation, and several other industries. If a CES were to fail in any of these industries, it would likely result in serious injury or death, damage to equipment, or environmental harm.

With this in mind, compared to previous years, the amount of software in smart cars has grown roughly 100 times. As a result, there is an increasing demand for embedded systems in the automotive market, including advanced driver-assistance systems (ADAS) and electromobility solutions for electric vehicles and hybrid vehicles. According to Markets and Markets, the embedded systems market is expected to reach USD$116.2 billion by 2025, up from USD$86.5 billion in 2020. This indicates that the embedded systems market is growing at a compound annual growth rate (CAGR) of approximately 6.1%.

That being said, BlackBerry QNX is intended to help customers streamline their development efforts to more efficiently launch safe, secure, and reliable systems. To date, BlackBerry QNX is utilized in more than 195 million vehicles, including brands like BMW, Aptiv, Bosch, Ford, GM, Honda, Mercedes-Benz, Toyota, and Volkswagen. Furthermore, BlackBerry QNX has design wins with 24 of the top 25 electric vehicle automakers. For context, a design win refers to the large-scale adoption of a system, in this case, BlackBerry QNX, for use in another company’s product. This can translate into a substantial and reliable revenue stream for a company like BlackBerry.

SAE Levels

As previously mentioned, according to BlackBerry’s latest agreement with BMW Group, the Company will assign a team of engineers to support the development of new SAE Level 2/2+ driving automation functions. I am no car expert, but let me try and explain SAE Levels. Following the emergence of autonomous vehicles, the Society of Automotive Engineers (SAE) developed a classification system to define the degree of driving automation a car may offer. With this in mind, the ‘Levels’ defined by the SAE range from 0-5.

Vehicles between the Levels of 0-2 require driver support systems, meaning an active and engaged driver is required. On the other hand, vehicles between the levels of 3-5 will utilize automated driving systems where integrated technology takes complete control of the vehicle without supervision. However, it is worth noting that as of May 2021, no vehicles sold in the U.S. market have Level 3-5 automated driving systems.

For the sake of relevancy, let’s talk a bit about SAE Level 2 vehicles. SAE Level 2 vehicles utilize advanced driver assistance systems (ADAS). ADAS enables a vehicle to control steering, acceleration, and deceleration, however, a driver is still required to sit in the driver seat to be able to take control of the car at any time. Some examples of SAE Level 2 ADAS include Tesla Autopilot and Cadillac Super Cruise systems. Okay, then what is Level 2+?

Put simply, Level 2+ adds in surround perception and AI to improve the safety and convenience of human-driven vehicles. In other words, Level 2+ vehicles are able to perform automated maneuvers such as making highway entrances and exits, lane changes, and merges. Level 2+ may also feature intelligent cockpit services, including driver monitoring, AI copilot technology, and advanced in-cabin visualization of a vehicle’s perception.

Financials

According to BlackBerry Q2 2022 Financial Results, the Company had cash and cash equivalents of USD$291 million on August 31, 2021, compared to USD$214 million on February 28, 2021. As of August 31, 2021, BlackBerry had total assets and total liabilities of USD$2,632 million and USD$1,314 million, respectively. As of August 31, 2021, BlackBerry reported revenue of USD$175 million compared to USD $259 million year-over-year (YOY). With this in mind, the Company’s net loss increased from USD$23 million on August 31, 2020, to USD$144 million on August 31, 2021.

BMW Group chose BlackBerry due to the Company’s comprehensive expertise and reliable track record related to its embedded software solutions, including BlackBerry QNX. Keep in mind, BlackBerry QNX recently secured additional design wins with industry leaders including Visteon, Nobo, WM Motor, Desay SV, Scania, and Volvo Group. Looking forward, on December 21, 2021, BlackBerry will report results for Q3 2022, via a conference call. This call can be accessed via live stream on the Company’s website.