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BlackBerry expands in auto security, QNX revenues under pressure

BlackBerry has launched a new automotive security testing software offering called Jarvis, a cloud-based tool for scanning vehicle software. BlackBerry will be hoping that Jarvis can become an automotive industry standard, as its QNX automotive revenue growth continues to flatline, despite wide adoption. The pressure will now be on QNX competitors, Linux-based Yocto and Windows Embedded Automotive, to come up with their own security scanners, as an additional feature to their software offering.

Jarvis scans code to identify security vulnerabilities in a car’s software. One of the key issues faced by automakers on software security is that much of the binary code that different pieces of hardware might be using is developed by a number of third party suppliers.

Just one piece of code could create a vulnerability in the car’s software system that could be exploited by a hacker – as was the case with infamous Jeep hacking of last 2015. A modern car has over 100m lines of code, creeping closer to 150m each week. Although security has improved as the software in cars has grown, so has the attack surface.

Automakers are launching more connected cars and autonomous vehicle pilots. These trends mean introducing some of the most sophisticated software ever developed for vehicles, and ensuring this code complies with industry standards around security will be a high priority for automaker, as cars become an increasingly tempting attack surface for cybercriminals. As security concerns grow, so will interest in the likes of BlackBerry’s security software-as-a-service offering.

BlackBerry claimed Jarvis was able to reduce the time of scanning binary code from more than 30 days to seven minutes. Once a car company signs up for Jarvis, the tool can be customized to meet their needs across their full software supply chain. BlackBerry is also touting this software as potentially having wider applications outside of the automotive sector, such as aerospace and defense projects, where BlackBerry already has a solid track record of selling software services.

Riot has been tracking the automotive industry’s approach to security for several years, spotting an uptick in both interest and understanding from the sector in 2017. However, many issues related to automotive security are yet to be resolved and BlackBerry will hope this new-found interest in the area drives customers to Jarvis. To find out more about issues with automotive security and our perspective on the market check out Riot’s Automotive Cybersecurity report.

Back in May 2017, Riot reported rumors from Macquarie analyst group, that BlackBerry was working with Aston Martin and Jaguar Land Rover on new security scanning software. The rumors suggested that BlackBerry was working on software that would scan a cars system when operational, in real-time, and alert the driver if in critical danger. The Macquarie analyst stipulated that BlackBerry’s security service could be launched as early as next year, costing $10 a month per vehicle.

The rumors haven’t been fully confirmed, as BlackBerry hasn’t indicated whether Jarvis will scan vehicles in operation, or whether the software will be offered direct to drivers as a service. Instead, BlackBerry said Jarvis will be offered as a pay-as-you-go service for automakers themselves.

Jarvis could be critically important to BlackBerry’s future automotive strategy, as although its QNX software has made it into some 60m vehicles, representing 50% of the market for infotainment security software, QNX has delivered flatlining revenue for the company. QNX is used to manage features of wireless connected cars such as infotainment systems – and eventually provide the software platform on which all other elements are built.

In Q3 2017, BlackBerry reported that of its nine-month earnings from the business segment which QNX falls into were $117m, just $2m more than in 2016. That said, BlackBerry has announced new significant partnerships for QNX, which have yet to translate into new revenues.

Earlier this month, Baidu announced it will be working with BlackBerry in a partnership that will see QNX used in Baidu’s Apollo self-driving platform, and also in Baidu’s CarLife smartphone software, DuerOS AI assistant and HD maps.

The partnership could prove lucrative for BlackBerry, as Baidu’s open source Apollo platform already has leading automakers, as well as tech companies including Microsoft, Nvidia, Intel get involved.

QNX saw another boost, with Qualcomm forming a strategic partnership with BlackBerry to collaborate on developing technology for connected vehicles. BlackBerry will be optimizing selected Qualcomm hardware to work with the QNX software. BlackBerry will also be working with Qualcomm on its Snapdragon SoCs.

Further details of which products BlackBerry well be developing with Qualcomm have not been made clear, but given Qualcomm has launched its C-V2X 9150 chipset, BlackBerry could be a potential partner in developing security for its C-V2X hardware.

The two companies have not always been happy bedfellows, Qualcomm agreed last year to pay a $940m rebate to BlackBerry to settle a dispute over royalty payments.

BlackBerry shares rallied twice in 2017, after Q2 and Q3 earning results that were stronger than expected and demonstrated that its transition from a smartphone maker to a software and service company is beginning to take hold. The key signs throughout the year were a boosted margin and revenues falling less than feared.

BlackBerry’s smartphones were once prolific in the corporate world, but the group withdrew from the handset business in 2016 after failing to compete with Apple and Samsung. The handset slide led to billions of dollars of losses, and a need for the company to restructure. BlackBerry has gone from a revenue of $2.9bn in 2013 to an expected $950m in 2017, but is returning to profitability.

In that time, BlackBerry has outsourced the production of the phones bearing its name to other companies, in markets such as Indonesia, and repositioned itself as a software and services company, focused on vehicles and the IoT. For 2017, BlackBerry is anticipating that its software and service business will grow 10-15%.

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