June 1, 2017

Could Blackberry be the Next

NVIDIA?
Citron learns from history that we could be in the
first stages of a WOW move from Blackberry
BlackBerry 24 month target: $20.
or Likely Buyout Target at a Sizeable Premium
Blackberry as the next NVIDIA
An interesting point not known by most NVDA shareholders, and
definitely not talked about on CNBC -- While the enterprise value of
NVDA stock has gone from $5 billion to $85 billion over the past 2
yearsits revenues have only doubled.
Why? Because Wall Street stopped valuing NVDA as a graphic chip
company and instead looked at its future in autonomous driving, AI, and
datacenter tech. It wasnt revenue growth that drove the stock, but
rather what segment the growth was coming from.
So before you buy NVDA at $140, check out $BBRY.

Blackberry:
(Will you change your name back to Research in
Motion PLEASE)
The downfall of Blackberry (NASDAQ:BBRY) as a handset maker is
legendary and will be studied for years. After numerous attempts to
revive handsets, CEO John Chen decided to focus on what Blackberry
does best -- secured software -- and look what is now under the hood.

To Understand Blackberry Study Nvidia June 1, 2017 Page 1 of 10

Citron Research
BBRY has virtually completed its transition from hardware to software,
cut expenses so it no longer burns cash, secured its balance sheet with a
billion dollar settlement from Qualcomm, and is run by talented CEO
John Chen, whose compensation is heavily pegged to the long term
outcome of the stock. The company is dedicated to building on its
legacy of providing secured wireless solutions to the world (minus the
handsets.)
When Wall Street shifts its frame of expectations toward the future, and
gets over their legacy business, watch out.

QNX is a Potential Game Changer in

Autonomous Driving.
With an install base of 60 million cars, by far the leader in a fragmented
space, Blackberrys QNX is at the forefront of securing cars for
autonomous driving technology -- regardless of which technology is the
eventual winner. Its clients include but are not limited to:

Audi Chrysler Jaguar Porsche

Bentley Ford Kia Toyota
BMW GMC Land Rover Volkswagen
Buick Honda Maserati
Chevrolet Hyundai Mercedes-Benz
Blackberrys QNX is a secure kernel-ized operating system and is
undoubtedly the most secure computer system installed in cars today.
QNXs safety pedigree, its certification to ISO 26262, is unmatched by
Windows and most versions of Linux.

To Understand Blackberry Study Nvidia June 1, 2017 Page 2 of 10

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Let the partners speak:

The deep learning capabilities of NVIDIA DriveWorks software on

the DRIVE PX 2 AI computing platform, combined with BlackBerry
QNXs ISO 26262 safety-certified operating system, enables
automakers to build the highest performing, ASIL-certified
autonomous driving solutions.
-- Kevin Flory, Vice President o fAutomotive Software, NVIDIA
http://www.qnx.com/content/qnx/en/news/release/2017/63881.html

The arrival of QNX SDP 7.0 aligns with the automotive industrys
shift towards 64-bit computing as automakers seek fast processing
speeds to deliver highly responsive, intelligent and connected
digital cockpits. Availability of QNX SDP 7.0 on 64-bit Qualcomm
Snapdragon 820A processors with an integrated Snapdragon X12
LTE modem, virtualization capability and high performance
heterogeneous compute engine enables automakers to realize this
next-generation digital cockpit experience.
Patrick Little, senior vice president and general manager, Automotive,
Qualcomm Technologies, Inc.

In a recent tech column that analyzed the current state of autonomous

driving and the many players competing for dominance, the unlikely
conclusion was:

To Understand Blackberry Study Nvidia June 1, 2017 Page 3 of 10

Citron Research
 By delivering 64-bit performance with comprehensive GPU
support, QNX SDP 7.0 will help the automotive industry realize the
vision of the unified digital cockpit. The ability to offer enhanced
graphics in a safe and secure manner is becoming increasingly
important across infotainment, instrument cluster, and heads-up
display systems.
-- Ron Martino, vice president of Application Processors product line,
NXP Semiconductors (Just acquired by Qualcomm)
http://www.qnx.com/content/qnx/en/news/release/2017/63881.html

Noted Technologist Rob Enderle wrote:

This last week, I saw presentations from AGL (Automotive Grade

Linux) and Microsoft in their battle for the connected car. It
reminded me a lot of the early days of the PC: lots of platforms from
very different kinds of companies, but only one clear leader.
Ironically, that leader is BlackBerry, largely because QNX is already
entrenched in the automotive world.
-- Rob Enderle

He ended the article with the thought that all investors should heed:

This means that the current hardware-based power structure

could switch to a software and component dynamic, which is what
both the NVIDIA-led hardware effort and BlackBerry-led software
group are betting on. That suggests that the partnership that would
be nearly impossible to beat would be NVIDIA and BlackBerry.
-- Rob Enderle
http://www.itbusinessedge.com/blogs/unfiltered-opinion/NVIDIA-could-be-kingmaker-as-linux-
blackberry-microsoft-battle-for-the-connected-car.html

These thoughts were validated in a recent tech article about the race for
the auto operating system:

To Understand Blackberry Study Nvidia June 1, 2017 Page 4 of 10

Citron Research
 But the real market leader here is BlackBerrys QNX. Theres not
much chance of anyone cutting them out as theyre already working
in about 40 automakers.
https://humanizing.tech/the-new-battleground-car-operating-systems-609592e07a31

**Note NVIDIA is already hiring engineers with QNX skills.

https://NVIDIA.wd5.myworkdayjobs.com/en-US/NVIDIAExternalCareerSite/job/US-CA-Santa-
Clara/Developer-Systems-Software-Engineer_JR1906676?source=Indeed

Citron is Learning from Its Failures

If we learn anything from Intels buyout of Mobileye, it is that an install
base is a valuable head start in autonomous driving. While we thought
Intel overpaid for Mobileye, Intel's buyout was driven by its excitement
about Mobileyes 16 million unit installed base.
The 60 million-install base of QNX dwarfs this. More importantly, QNX
is not betting on which technology will win, but rather has the
backbone to work with LIDAR and cameras. Watch this video for more
understanding. (start at the 2 minute mark)
http://www.qnx.com/content/qnx/en/products/qnxcar/index.html

To Understand Blackberry Study Nvidia June 1, 2017 Page 5 of 10

Citron Research
The Bear Case
Ironically enough Citron notes a recent bear case on BBRY written on
Seeking Alpha noting that the emergence of Google as a larger more
capitalized player in the auto automotive space along with $BBRY
eventually becoming just another automotive supplier. That was a
good part of the Citron bear case on Mobileye before it got acquired
for $15 billion.
https://seekingalpha.com/article/4074578-blackberry-verge-
disruption?li_source=LI&li_medium=liftigniter-widget

The Blackberry bear case argues that its installed base will soon be
disrupted into oblivion by the big guys Apple and Google. But the
dynamics of the competitive landscape doesnt always work out that
way.
Mobileyes 16 million installed base was an asset Intel couldnt pass up.
And a raft of credible potential competitors hardly suppressed its value
to an acquirer with lots of cash. We think the parallels to Blackberry are
compelling. Given its market-leading automotive installed base, its IP
portfolio, its background in secure computing, its having quenched its
cash burn, and added a fresh billion in cash for R&D, Blackberry isnt
going away. Those 60 million QNX installs will get monetized one way
or another.
Citron believes if anything this validates Blackberry position and makes
it ripe as an acquisition target for countless suitors. Qualcomm recently
purchased NXP for its exposure in Automotive, Internet of Things,
security and networking
https://www.qualcomm.com/news/releases/2016/10/27/qualcomm-acquire-nxp

(Time the rethink the $BBRY short)

There's More to Blackberry than QNX

Similar to NVDA's market presence extending to more than datacenter
but, also artificial intelligence Blackberry is at the forefront on
Internet of Things. Citron first introduced this thought 3 years ago
when we covered $BBRY, but now we see it in execution.

To Understand Blackberry Study Nvidia June 1, 2017 Page 6 of 10

Citron Research
BlackBerry RADAR

BlackBerry RADAR is a secure asset tracking solution for the

transportation and logistics industry. Radar provides a greater range of
sensor readings, reported more often, than any other solution in the
market today. This allows customers to accurately monitor assets,
manage yards, analyze utilization, measure efficiency, and reduce theft
based on a near real-time view of the fleet.

Greater knowledge gives Fleet Owners more efficiency and as noted by

ZDNET.

BlackBerry's Radar could be compelling evidence that the company

can use its mobile, embedded systems and security knowhow to
grow in new industries.

http://www.zdnet.com/article/blackberrys-radar-internet-of-things-meets-trucking-system-critical-
to-turnaround/

The details of how RADAR helps fleets can be seen here:

http://fleetowner.com/technology/blackberry-modagrafics-introduce-radar-iot-asset-tracking-
system

Blackberry is also rumored to be in beta with Walmartneedless to

say, any validation from this logistics behemoth could be a game
changer.
This is an example of how truck fleets are using the internet of things to
uncover opportunities for massive efficiencies at scale.

To Understand Blackberry Study Nvidia June 1, 2017 Page 7 of 10

Citron Research
Management Positioning
When first discussing the Blackberry turnaround years ago, it felt as if
CEO Chen was actually working against shareholders. Instead of
discussing growth and the future his words seemed focused more on
keeping the company alive and how to stop the bleeding. We now see a
new Chen who is optimistic about the future:
http://www.bnn.ca/there-s-no-danger-john-chen-on-blackberry-s-turnaround-1.711522

Most importantly on the last conference call one question sticks out that
was asked by an RBC analyst:

Paul Treiber
Just one follow-up to that. In regards to other automakers, I
mean, what do you think the likelihood of winning
agreements of a similar magnitude of Ford?
John Chen
Likely.

The Ford/Blackerry partnership is well known, but Chen would not

have responded likely if he did not believe BBRY was on the cusp of a
transformative change in QNX.

To Understand Blackberry Study Nvidia June 1, 2017 Page 8 of 10

Citron Research
CEO Chen has now disclosed publicly that he plans on using his war
chest of cash, investing over $1.5 billion in what is working. We could go
on and discuss:
1. Value of patent portfolio: 40,000+ patents
2. Licensing of messaging app (disrupting business like Twilio,
opening opportunities like Uber)
3. The Federal Cybersecurity Operations in which Blackberry just
received FedRAMP Authorization .(think of the WannaCry
attack)
4. Potential for future litigation victories with Avaya and Nokia
(Here and Here)
5. Believe it or not the success of their new phone KeyOne (on which
they receive royalties) and is already the #1 unlocked phone on
Amazon.

These are all potential catalysts that can add value to an already IP rich
company.
The risk involved with this investment is that the company does not
execute or that autonomous driving or the IoT does not evolve as
expected.
However, the downside seems very limitedIn the unlikely event that
RADAR is a complete zero, and BBRY cannot bump its ASPs in the car, or
launch a credible security service, we still estimate that at 2.5x EV/Sales
we would get a target price of US $8.30.

The full monetization story of QNX and RADAR will take pages to tell,
but were best outlined by longtime Macquarie Blackberry analyst Gus
Papageorgiou when he stated that the stock has the potential to hit $45
if executed properly yes $45:
http://business.financialpost.com/fp-tech-desk/blackberry-stock-up-after-analyst-predicts-stock-
price-could-quadruple-by-2020

To Understand Blackberry Study Nvidia June 1, 2017 Page 9 of 10

Citron Research
 Conclusion
Google and Apple are both known to be maneuvering to build an
operating system for autonomous vehicles. Tesla wants in, as does
Samsung. Each of the three companies quoted below (Qualcomm,
NVIDIA, and NXP Semi) has a compelling case as an acquirer of
Blackberry primarily to acquire QNX. Even without an acquisition and
proper execution Citron expects a double out of Blackberry.
Now will the company change it damn name back to Research in
Motion!!!!

Cautious Investing to All

To Understand Blackberry Study Nvidia June 1, 2017 Page 10 of 10

Citron Research