InvestorPlace columnist Larry Ramer recently argued that Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Qualcomm (NASDAQ:QCOM) would become potential buyers of BlackBerry (NYSE:BB) once they become more familiar with the company’s QNX operating system. Ramer believes that’s a good reason to buy BB stock.    

“[C]ompanies can’t hire enough cybersecurity experts to protect themselves from ruinous hacks, so they need top-notch products like those of BlackBerry to defend themselves,” Ramer stated in his Oct. 18 column.

“As a result, there’s tremendous demand for BlackBerry’s products, making the company a potentially alluring takeover target. Additionally, BlackBerry’s systems will enhance the attractiveness of an acquirer’s products…by making them more secure and private.”

Perhaps I’m missing something. Isn’t BlackBerry still losing money? And if the QNX operating system was so vital to Google’s business, I am sure that Alphabet would already have acquired BlackBerry.

It doesn’t seem like sensible capital allocation for Alphabet to pay billions of dollars to acquire BlackBerry when it can give the Canadian company a lifeline by choosing to work with it on Android Automotive. 

In the end, Alphabet may buy BlackBerry.  However, I don’t think that’s going to happen. Here’s why.

BB Stock Is Up 113% Over the Past Year

Although BB stock is up 120% over the past 12 months, it’s traded  between $10 and $15 for most of 2021.

In mid-September, before BlackBerry reported less-than-stellar fiscal second-quarter results, InvestorPlace contributor Ian Bezek argued that there was little evidence to point to a turnaround by the company. 

Except for its Internet of Things (IoT) applications, including its QNX operating system, there was little at BlackBerry to justify its hefty valuation,, Bezek said. 

So let’s consider its Q2 results. 

Its three operating segments combined delivered a 32.4% decrease in revenue — $175 million compared to $259 million — over the same period a year earlier. 

The revenue of the company’s cybersecurity business was flat year-over-year at $120 million. The unit accounted for 69% of the company’s overall sales. The sales of its QNX-dominated IoT unit, which Bezek thought was a bright spot in an otherwise terrible situation , generated a year-over-year sales increase of 29%, with its top line reaching $40 million. However, its licensing and other segment had just $15 million in revenue in the quarter, down from $108 million a year earlier. 

Segment Revenue for All of 2022

According to BlackBerry’s  Q2 10-Q report, the company says it expects its cybersecurity unit to generate  modest sequential growth for the final two quarters. Let’s assume 5% sequential growth each quarter. That translates to $126 million in Q3 and $132 million in Q4, resulting in a full-year total of $485.3 million. 

As for IoT, its revenue climbed 23% over the first half of the year, to $83 million. So let’s assume that it generates $166 million in 2021 . That brings us to $651.3 million in full-year revenue from two out of the company’s three segments. 

Finally, its licensing and other segment, which includes its patent portfolio, is expected to generate $60 million in 2022, down from its original guidance of $100 million. 

That would  bring the company’s revenue this year to $711.3 million. Last year, its top line  was $893 million. If my estimates prove to be correct,  BlackBerry’s revenues will have declined over 31.6% since 2018.

And, based on my estimates, the IoT segment would only account for 23% of the company’s overall revenue. 

The Bottom Line

Why would Alphabet or Qualcomm pay $6.2 billion for BlackBerry when they could only immediately utilize the IoT segment, which I expect to generate $166 million of revenue this year? That’s a price-sales multiple of 37 times.  

It’s true that a purchase price of $6.2 billion would value  the entire company at eight times sales, based on my estimate. But then the acquirer would have to spend time extracting the necessary value from BlackBerry’s cybersecurity and patent portfolio segments to justify the multiple.

I don’t think that will happen because, in order to stay in business,  BlackBerry will gladly sell Google the QNX Hypervisor software needed to run the Android Automotive operating system. 

From my vantage point, BlackBerry is in no position to reel in such a significant buyer. Maybe I’m wrong, but I don’t think so.

BB stock isn’t worth more than single digits.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.