BlackBerry Ltd at JPMorgan Tech/Auto Forum (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Sure. So before I kind of move on to some of the other markets, let's kind of hit on QNX and the unbilled software offering here. For those who are less familiar with QNX, John, maybe if you can kind of explain what it does, that would be helpful. John Wall - BlackBerry Limited - SVP and Co-Head of BlackBerry Technology Solutions - Products, Engineering & Operations Absolutely. I'd love to. So QNX has 2, what I would call, foundational products. One is the real-time operating system called Nutrino, and the other is our hypervisor that provides virtualization of CPUs. Both are microkernel-based. These are deeply embedded products that are particularly suited to safety-critical applications. We've been able to reach the highest level of certifications for both those foundational products in the automotive field, medical and industrial. We achieved ISO 26262, ASIL-D, and we've achieved 61508 ASIL-C, and -- or ASIL-3, sorry, which is the highest level of safety. And that means that our products are designed for mission-critical. In automotive, in particular, that means our products are designed for things that will control steering, braking, anything that controls the vehicle. So examples of this within automotive, it is obviously ADAS, which is active safety; digital cockpit, which is a new trend where we are seeing the consolidation of infotainment systems and other in-cabin functions such as digital cockpits get consolidated to one hardware module and using our virtualization to separate safety and nonsafety systems, the infotainment being nonsafety. But also in other markets such as MRI scanners for medical, medical robotics, nuclear power plants, oil and gas. So if you've ever seen a wind turbine on your travels across various parts of the world, more than likely QNX is running in those systems to control the pitch of the blade, which is very important for keeping the system stable. So those are just a few examples.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Got it. You recently announced Blackberry IV, a co-development and co-marketing agreement with AWS. So how is this different to what QNX is currently doing? John Wall - BlackBerry Limited - SVP and Co-Head of BlackBerry Technology Solutions - Products, Engineering & Operations Actually, this is quite different from what QNX has been doing traditionally. So we announced IV, which is the intelligent vehicle everywhere. So IV is a cloud-connected and cross-platform that is multi-OS, multi-cloud, in-car software that allows automakers to access a vehicle sensor data in compliance with safety and security requirements to process that data with a datable code to create new vehicle insights and then share those insights with developers through a consistent and simple in car API mechanism. So essentially, what we've done here is we've looked at how do we make vehicles look common from an API perspective? How do we access vehicle data in a way that is consistent from car brand to car brand? This is a very tall order because vehicles are still pretty bespoke as far as their electrical architectures. No two cars from different OEMs look exactly the same. They use different sensors. They have different architectural layouts. So the idea with IV is to create a middleware, I would say, translator that goes into the vehicle. At the bottom end of IV, we are talking directly to sensors within the vehicle, but then, we use either machine learning or other processing to normalize that data into what we call synthetic sensors. And as an example that I'd like to you look at is if you think of a smart city and you think the smart city that wants to know the conditions of their roads during the winter, a synthetic sensor within a vehicle could be a combination of wheel, speed sensor, antilock brake sensor, temperature sensor and potential camera input. And with those 4 sensors, you could normalize the data into a synthetic sensor that would allow the smart city to know, do I have an icing condition? Do I have cars slipping in a certain part of on grid? Now imagine the power of this, if the way to access that data was consistent from carmaker to carmaker. So the real power behind IV is to make sure that we grow an ecosystem that allows scale and allows app developers to create common applications, smart city stack, to access common data across different car brands. And so the idea here is to ensure that the carmakers have the best ability to monetize their data or to save money by being able to do things like analytics of how their cars are behaving on the road. So the idea is to grow an ecosystem that will become a de facto standard in the industry.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Good. If I kind of think back almost like 3, 4 years ago, I do kind of remember some start up companies, private companies that were trying to harmonize the data across coming from different vehicles. So are companies already doing this? Why would IV be different on this front? John Wall - BlackBerry Limited - SVP and Co-Head of BlackBerry Technology Solutions - Products, Engineering & Operations Yes. That's a great question. And there are lots of companies doing this. This is -- we haven't invented anything new here. Carmakers are very interested in monetizing their data. They know there's a lot of value in their data, especially as the car continues to evolve towards autonomous drive and active safety, lots of sensors within the vehicle, one of the most complex IoT endpoints. So they know there's a lot of value in their data. I think the challenge has been each carmaker is creating a bespoke solution and there's really no scale to it. And since there is no scale or very little scale, it creates, I think, a challenge to really get application developers out there ideating on what the next big thing could be. I think you'd like to be able to see the ability to leverage the ecosystem from the phone. Lots of people have great ideas out there, and I think the more people that have the ability to access this ecosystem, the more great ideas the carmakers will get. I think the other challenge with some of the bigger players in this area has been ownership of the data. So from -- right from the beginning, Blackberry and Amazon have made it very clear, we have no desire to own the data and we have no desire to control the data. That's solely in the hands of the OEM. And that's really not an area that we're looking to get involved. The real purpose of this collaboration is to create that de facto ecosystem that will really get the ecosystem out there, developing ideas and applications that are going to be cool for the car.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. Two follow-up questions on IV and more related to automakers. So again, I'll just combine them for everyone's benefit here. Is Blackberry QNX or IV going to be in the new vehicles that NVIDIA and NEO will be working on together? The second question on similar lines, is IV something Tesla will consider? John Wall - BlackBerry Limited - SVP and Co-Head of BlackBerry Technology Solutions - Products, Engineering & Operations Yes. Those are great questions. Obviously, I think everybody -- I think most people know we have a very strong relationship with NVIDIA, as we announced a few years ago that QNX is the foundational OS of their drive OS offering. I don't know that we can make any comments at the moment specific OEMs as we made the announcement on December 1. What I can say is the reaction by OEMs to the announcement has been overwhelming. We've already had a workshop with one OEM prior to Christmas. So the -- there's a lot of excitement about the ability to create this ecosystem. When people think about the ecosystem in the past, they've thought about, well, the carmakers are going to have to get together, they're going to have to create a kind of a unified architecture for the vehicles to be able to create this ecosystem. Try to think of it kind of in terms of iOS or Android. Not iOS or Android, but something like that, but that's appropriate to the automobile. This is kind of really taking -- this is really looking to take a shortcut and really create that app ecosystem before the carmakers have had the ability to necessarily unify their architectures. To the point of a Tesla, Tesla could definitely be a customer of this.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Got it. A ton of new questions on QNX, but before I get to that, one question that came in is, are the patterns for sale? Which kind of coincides with a news release, I think I saw saying that Blackberry selling to 90 patents to Huawei. And I'll just give you an opportunity to answer that question as well as comment in terms of anything that's been announced recently.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. Got it. So moving to QNX, let me take this one. Could you outline the content per vehicle opportunity for QNX on an EV, and separately on AV? And if you don't want to give dollar per car, could you suggest the number of QNX RPOS -- I apologize, I don't know the acronym. John Wall - BlackBerry Limited - SVP and Co-Head of BlackBerry Technology Solutions - Products, Engineering & Operations Yes. Yes.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Is automotive-grade Linux a strong competitive threat? Who is the most significant competitive threat in terms of the auto ecosystem? And how is QNX superior to these over time? John Wall - BlackBerry Limited - SVP and Co-Head of BlackBerry Technology Solutions - Products, Engineering & Operations Right. So I would say that we have 2 groupings of competitors. We have the traditional under-the-hood, safety-based operating systems. And those are Green Hills and Wind River. Green Hills is very well known in aerospace and defense, and so is Wind River. I think we've been quite successful against those two. And then on the other side of the spectrum coming more from consumer side and coming more from a high-performance compute platform, you have Linux in all forms, whether it's AGL or Ubuntu or something else. It doesn't really matter. Now the advantage that QNX has over Linux is that those Linux distributions are not safety certified. Safety certification is a lot of work. It's very hard to achieve. It's especially hard to achieve when you look at a product like Linux that -- part of the beauty of Linux is it moves very fast, and it's contributed to by the community. But that's also its Achilles' heel when it comes to safety because safety requires due diligence around safety cases, design, knowing the providence of where the software came from, a lot of testing, a lot of impact analysis. So I mean, our view is we take all the competition seriously. And we're just trying to continue to push our product forward to be better performance and a higher level of safety against all our competitors. And we believe that will help keep us in the lead.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. Last one, let me squeeze this one in. Where do you see the biggest catalyst for your loyal shareholders?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Great. That's all we have time for. Steve, and John, thank you both for taking the time to attend the conference, and it was a pleasure hosting you, and great discussion. Thank you. John Wall - BlackBerry Limited - SVP and Co-Head of BlackBerry Technology Solutions - Products, Engineering & Operations Thank you, Samik. Thank you very much.