BlackBerry axes smartphone business

Source Mobile World Live

 

BlackBerry is to end its device hardware activities, having failed to secure a future for the business in today’s smartphone market.

The news is not much of a surprise: BlackBerry head John Chen had said that while efforts were being made to restore the business to profitability, it was not a sacred cow – and the numbers have shown no evidence that an improvement was on the cards.

In the most recent quarter, BlackBerry recognised revenue on around 400,000 devices, compared with more than 500,000 in the prior quarter.

And Chen has also been repositioning the business as an enterprise software player, with him now stating that “our pivot to software is taking hold”.

In a statement today, the BlackBerry CEO said: “The company plans to end all internal hardware development and will outsource that function to partners. This allows us to reduce capital requirements and enhance return on invested capital.”

Chen said the move comes with “a long list of savings”, with no need for it to any longer make component purchases and carry inventory. And job cuts are also likely.

“BlackBerry will focus on providing state-of-the-art security and device software,” Chen said. It stands to receive royalties from device makers using its technology.

Indonesia deal
In line with this, BlackBerry announced an agreement with a new joint venture, BB Merah Putih, to licence software and services for the production of devices targeting Indonesia.

The venture is led by Tiphone Mobile Indonesia, which is said to have the largest distribution network in Indonesia, and which is also an affiliate of operator Telekomunikasi Indonesia. Chen said that other than licensing, BlackBerry plays no role in BB Merah Putih.

In a blog from BlackBerry’s Ralph Pini, chief operating officer, the company explained the decision behind the focus on Indonesia: “It is fitting that Indonesia is the first market where we are licensing our device software, as the country is historically BlackBerry’s largest market for devices and, by far, the most substantial for the BBM messaging software we created.”

With BlackBerry’s most recent handset, Dtek50, leaning heavily on Chinese handset maker TCL (which also uses the Alcatel brand), it would also be unsurprising to see this relationship deepen.

For its software business, Chen said: “In Q2, we more than doubled our software revenue year over year and delivered the highest gross margin in the company’s history. We also completed initial shipments of BlackBerry Radar, an end-to end asset tracking system, and signed a strategic licensing agreement to drive global growth in our BBM consumer business.”

Financials
Software and services revenue for the quarter to 31 August was $138 million.

The company reported a loss for the quarter of $372 million, compared with a prior-year profit of $51 million, on revenue of $334 million, down from $490 million.

In other news, the company’s CFO James Yersh is to be replaced by Sybase exec Steven Capelli, effective 1 October.