New dawn of (very) smart cars
Blackberry-Amazon deal makes your car your real mobile phone
Remember that creepily invasive scene in the movie Minority Report when Tom Cruise’s new eye-balls are bombarded with targeted ads as he walks through a mall?
Your car could offer a similar experience in the future.
And BlackBerry, that Canadian darling that has seen its phones rendered extinct by iPhones and Androids, is leading the way. Recently, it signed a deal with Amazon Web Services, the cloud computing arm of Jeff Bezos’ Amazon.com Inc., to leverage its Intelligence Vehicle Data Platform, called IVY.
The company will apply machine learning to “generate predictive insights and inferences, making it possible for automakers to offer invehicle experiences that are highly personalized and able to take action based on those insights.”
Grant Courville, vice-president, products and strategy at BlackBerry QNX, said it would be up to automakers how they develop better and personalized in-car experiences for drivers and passengers.
“Preventative maintenance, intelligent diagnostics, targeted consumer experiences, vehicle performance and safety are a few of the areas that are of major interest to our customers. It’s these areas that we’re having the most discussions around and that have evoked the most excitement among automakers and the automotive ecosystem at large,” Courville said.
NEW FRONTIER
Analysts say it could be a game changer for the Waterloo-based maker that now mostly develops software.
“I’m looking at my browser right now and it knows what I searched for on Amazon for Christmas the other day,” Joe McCabe, chief executive officer of AutoForecast Solutions LLC, said by phone from a Philadelphia suburb. “The same thing is going to be in your car. The car is going to be your mobile cellphone.”
The ‘in-vehicle experiences’ may develop over the next few decades, but companies are positioning themselves early in the space.
“It’s truly the next frontier of how you can target a consumer based on their buying preferences, their driving preferences, their life preferences,” McCabe said.
At stake is billions of dollars a year in computing technology, vehicle upgrades, app developments and advertising as car makers push the development of sensor-laden, and eventually autonomous, vehicles spewing tons of data while AWS and its rivals Microsoft Corp.’s Azure, Alibaba Group.’s Cloud unit and Alphabet Inc.’s Google Cloud compete to manipulate those bytes.
“If the software in the vehicle knows your proximity in the world, if it knows that traditionally on Wednesdays you stop at McDonald’s or a Tim Hortons to pick up something, then it’s going to know ‘OK, I have a market,’” McCabe said. “It’s going to be integrating with the mapping software, integrating with the advertisements, to help drive the consumer — no pun intended — in the markets they want.”
BlackBerry’s IVY is an attempt to standardize the software used to access data from the scores of sensors in cars, so app and product makers can slash their development time and plug into a uniform system. It’s somewhat akin to how Apple Inc. and Alphabet dominate the phone market with iOS and Android operating platforms, and it’s based on BlackBerry’s QNX, a vehicle operating system already in 175 million vehicles.
The data, to be controlled and owned by the automakers, will be uploaded to the AWS cloud and make it digestible across the app development world.
Besides advertising, spinoffs could include using the data to recognize driving conditions and driver behaviour so the car recommends the driver turn on features such as traction control or book a charging station based on location and route.
The BlackBerry-AWS partnership is about automakers and developers delivering new services, according to John Chen, BlackBerry chairman and chief executive officer.
“Data and connectivity are opening new avenues for innovation,” Chen said in a statement last week. “This software platform promises to bring an era of invention to the in-vehicle experience and help create new applications, services, and opportunities without compromising safety, security, or customer privacy.”
FINANCIAL IMPACT
BlackBerry and AWS didn’t state the value of the deal and did not reveal which automakers would be the first to use IVY but said it should appear on 2023 models.
That time to market has CIBC analyst Todd Coupland issuing a neutral stance on BlackBerry stock. “We continue to recommend investors wait for a more attractive entry point,” Coupland said.
Expectations of minimal growth next year and that earnings per share of 40 cents “will take time,” plus a valuation that is below peers due to lower growth, all contribute to the outlook, Coupland said.
Still, he noted the deal is a positive for BlackBerry because of expected demand from global automakers. With an expectation that IVY generates revenue of $10 per new vehicle from 15 per cent of the global light vehicle production, Coupland raised the stock’s price target to $8 from $5.50. The Blackberry stock has already jumped since the AWS announcement.
Likewise, Scotiabank is taking a wait-and-see approach to its assessment.
“IVY offers an intriguing opportunity for Blackberry, however we remain cautious on the shares as we await initial customer roll-outs and further clarity on the enduser applications and associated revenue model,” analyst Paul Steep wrote.
“We view BlackBerry as holding potential in various areas of the business (e.g., security software, QNX) along with having a strong balance sheet and a track record of innovation. However, we would need to see a material improvement in the performance of the firm’s software businesses to become more constructive on the shares.”
Royal Bank of Canada argued in September BlackBerry’s 12 per cent drop in staffing over the past two years shows it’s pursuing profitability, but “still optimizing its cost base and reprioritizing in-vestments.”
Meanwhile, peers such as MobileIron Inc., CrowdStrike Holdings, Inc. and Everbridge Inc. have in-creased hiring this year.
“BlackBerry remains a ‘show me’ story,” analyst Paul Treiber wrote at the time. “The investor de-bate on BlackBerry stems from the company’s future opportunity compared to its current momentum.”
Treiber didn’t reply to an email seeking an update.
But that momentum shown by the AWS deal is gaining speed and is critical for BlackBerry’s turnaround, according to McCabe of AutoForecast Solutions.
“This is going to put them at that forefront because they’ve already integrated in the security and safety side, they’re already invested in the vehicle side and now leveraging the partnership with Amazon is just going to give them a huge amount of growth into this inevitability of vehicles being a mobility service and another revenue model,” McCabe said.
We’re speeding towards a future world where ads always find us at the same means of data organization and cloud computing also make us safer.
“You’ll have a car that’s fully automated in the future,” McCabe says. “How do you make sure people aren’t hacking you, that you can take your hands off the wheel and it’s driving you safely? BlackBerry’s skill is definitely on that security side. Always has been.
“Now you bring in the Amazon methodology of how do we monetize it? That’s the next frontier for these guys.”