Management of BlackBerry Limited (TSX: BB) expects its software and services segment to grow at the high end of the 10-15% rage in 2018
SmallCapPower | July 21, 2017: BlackBerry Limited (TSX: BB) (NASDAQ: BBRY) announced Thursday that it has won the right to sell tools for encrypting phone calls and text messages to the U.S. Federal government, garnering an endorsement from the National Security Agency for the products.
The BlackBerry endorsement came from the NSA’s National Information Assurance Partnership (NIAP), which reviews technology products sold to consumers and enterprises to see if they meet the security requirements for government usage. One of the tools BlackBerry is now able to sell to U.S. Federal agencies is SecuSUITE for Government, software from the German encryption firm Secusmart owned by BlackBerry. SecuSUITE is a multi-platform service for iOS, Android, and BlackBerry offering end-to-end encryption of calls and text messages, one which works regardless of the carrier or data connection used by participants.
This contract can boost the Company’s Software revenues, which can negate the currently underperforming handset segment (declined 50% in last two years) in the near term. BlackBerry said its encrypted voice and text messaging products are used by government agencies in 20 countries in Europe, Latin America, Southeast Asia and Africa. And currently, Germany is its biggest government customer.
In terms of valuation, Blackberry currently trades at price to TTM sales of 5.94x, price to book value of 2.48x and trailing PE of 52.55x.
Management expects BlackBerry’s software and services segment to grow at the high end of the 10-15% rage in 2018, giving them revenues for the segment of $646mm when applying the 15% growth rate. Then, assuming revenues from their other business segments will decline at the same pace they did in 2017, we get total 2018 revenues of $1.1B. Applying the North American Software & Services industry median EV/Revenue multiple of 3.13x and applying it to BlackBerry’s 2018 revenues gives us a valuation of $5.16B.
Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.
The Content contained on this page (including any facts, views, opinions, recommendations, description of, or references to, products or securities) made available by SmallCapPower/Ubika Research is for information purposes only and is not tailored to the needs or circumstances of any particular person. Any mention of a particular security is merely a general discussion of the merits and risks associated there with and is not to be used or construed as an offer to sell, a solicitation of an offer to buy, or an endorsement, recommendation, or sponsorship of any entity or security by SmallCapPower/Ubika Research. To read more of this Disclaimer please click on the button below: