BlackBerry CEO John Chen shows off the company's Passport handset in this undated photo.
BlackBerry CEO John Chen shows off the company's Passport handset in this undated photo.

Published: September 28th, 2016

BlackBerry Ltd. will exit the hardware business internally and leave development of future smartphones to its partners, according to BlackBerry CEO John Chen in a press release issued Wednesday morning.

Previously, Chen had said that if BlackBerry’s hardware business was not profitable within its current fiscal year, it would exit. The news that it will be out of the hardware game comes as BlackBerry releases its Q2 2017 financial earnings.

“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 says in the press release. “We are reaching an inflection point with our strategy. Our financial foundation is strong, and our pivot to software is taking hold.”

Fans of BlackBerry handsets can expect that in future, BlackBerry branded phones will be pushed to market in a similar fashion to the DTEK50 released this summer. Rather than develop the hardware for the device internally, BlackBerry chose to use a design created by TCL, the parent company of Alcatel. Also, the devices will continue to run on Android, meaning that BlackBerry is now branding phones where it neither designs the hardware or the OS being used.

What it does design is the custom security and productivity software that comes pre-loaded on the handsets. For example, the DTEK50 comes with its namesake DTEK software that gives the user transparency into how applications are using their permissions on a device, among other details.

BlackBerry reported a 31.8 per cent drop in year-over-year revenue for the second quarter, with a net loss of $372 million USD. But aside from one-time write-downs, BlackBerry says it broke even. Chen focused on an improvement to its software and services revenue, which was $156 million USD for the quarter.

To shine a bright light on BlackBerry’s future during a call with investors, Chen pointed to two different partnerships made in Indonesia this past quarter. One such partnership, made with BB Merah Putih, will see that company manufacturer and distribute BlackBerry-branded handsets in that country. BlackBerry’s new hardware strategy will be to make royalties on the sale of branded devices by partners, he says.

“We focus all of our efforts where we can provide differentiation, software and security. This focuses on all our strengths and is where the market is going,” Chen says. “Overall we believe this is a very viable business. We are seeing a lot of interest around the world for bringing a BlackBerry-branded device to market with the security only we can provide.”

Another bright spot on the balance sheet included shipping BlackBerry Radar, an asset tracking solution, and its first customer with logistics company Caravan Transport Group. The solution is an important part of BlackBerry’s Internet of Things (IoT) division.

Chen said on the call with investors that BlackBerry is seeing more interest in its fleet tracking solution. He framed it as superior to existing “legacy” systems on the market.

“We don’t have a lot of competition,” he says. “I just need to go in and hit the replacement cycle.”

Chen says BlackBerry is also in late stage discussions with prospective partners in China and India, Chen says. Those could look similar to the recent partnerships made in Indonesia.

BlackBerry’s transition from hardware to software will be complete within this fiscal year, Chen says. 


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