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

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 years…its 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 wasn’t 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 2 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, Blackberry’s 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

Blackberry’s QNX is a secure kernel-ized operating system and is undoubtedly the most secure computer system installed in cars today. QNX’s 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 3 of 10 Citron Research

Let the partners speak:

http://www.qnx.com/content/qnx/en/news/release/2017/63881.html

In a recent tech column that analyzed the current state of autonomous driving and the many players competing for dominance, the unlikely conclusion was:

“The arrival of QNX SDP 7.0 aligns with the automotive industry’s 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.

“The deep learning capabilities of NVIDIA DriveWorks software on the DRIVE PX 2 AI computing platform, combined with BlackBerry QNX’s 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

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

http://www.qnx.com/content/qnx/en/news/release/2017/63881.html

Noted Technologist Rob Enderle wrote:

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

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:

““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

“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

“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)

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

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 Intel’s 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 Mobileye’s 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

“But the real market leader here is BlackBerry’s QNX. There’s not much chance of anyone cutting them out as they’re already working in about 40 automakers.”

To Understand Blackberry Study Nvidia June 1, 2017 Page 6 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 doesn’t always work out that way.

Mobileye’s 16 million installed base was an asset Intel couldn’t 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 isn’t 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 7 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.

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 Walmart…needless 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.

“BlackBerry's Radar could be compelling evidence that the company can use its mobile, embedded systems and security knowhow to grow in new industries.”

To Understand Blackberry Study Nvidia June 1, 2017 Page 8 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:

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.

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.

To Understand Blackberry Study Nvidia June 1, 2017 Page 9 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 limited…In 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 10 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