Transformation Underway: BlackBerry Sells Cylance to Arctic Wolf

The former smartphone icon BlackBerry continues its transformation and sells its Cylance endpoint security solutions to private cybersecurity provider Arctic Wolf. This announcement led to a remarkable 16 percent rise in BlackBerry's stock. The sale, valued at approximately 160 million USD, demonstrates BlackBerry's strategic realignment as a provider of software solutions in the cyber and Internet of Things sectors. Arctic Wolf will finance the acquisition of Cylance by issuing 5.5 million of its own shares, estimated at 40 million USD, and a cash payment of 80 million USD upon the contract's conclusion. Additionally, a final payment of 40 million USD is scheduled for one year after the deal's closure. Despite the agreement, it remains unclear for investors how this sale will actually impact BlackBerry's financial performance. While BlackBerry retains its secure communication portfolio, which generates 378 million USD annually, questions arise regarding the revenue loss from the sale of Cylance. If Cylance still generates approximately 189 million USD annually, the sale could be valued at eight times the revenue. However, if Cylance contributes the lion's share of the income, the valuation of the sale could drop to four times the annual revenue. This raises the question for investors as to how BlackBerry will be positioned after the sale. The answer could come from the next quarterly report. However, considering BlackBerry's overall financial situation, which recently recorded losses of 138 million USD and a negative free cash flow of 81 million USD, the sale seems unlikely to promise the desired financial boost.