Date
20 January 2017
Chief executive John Chen said BlackBerry has signed a deal with Indonesia's BB Merah Putih to manufacture, distribute and promote new devices in that country, its largest handset market. Photo: Reuters
Chief executive John Chen said BlackBerry has signed a deal with Indonesia's BB Merah Putih to manufacture, distribute and promote new devices in that country, its largest handset market. Photo: Reuters

BlackBerry to outsource phones and focus on software

BlackBerry Ltd. says it will stop making its own smartphones and will instead outsource them.

The move will help the company avoid the risks of a competitive market and focus on its more lucrative businesses of software and managing rival devices, Reuters quotes chief executive John Chen as saying on Wednesday.

The company’s shares rose 5 percent as investors welcomed a further shift away from the money-losing handset business, in which BlackBerry had gone from being a market leader to trailing far behind rivals like Apple Inc., the news agency said.

In a model for how it plans to keep BlackBerry-branded handsets in the market, the company said it has signed a deal with Indonesia’s BB Merah Putih to manufacture, distribute and promote new devices in that country, its largest handset market.

BlackBerry said it was in late-stage discussions for a similar deal in China and working on several India initiatives.

“What we did was cut off the entire chain, and I’ll take a royalty,” Chen told reporters, noting it could now avoid inventory and supply chain costs.

“I’m still in the handset business, but I’m in it in a profitable way.”

Chen said less than 100 jobs would be lost from the move away from making hardware.

The change is likely to weigh on overall revenue for two more quarters before software revenue growth makes up for the decline, he said.

Revenue fell to US$334 million in the fiscal second quarter ended Aug. 31 from US$490 million in the year-ago period, missing analysts’ estimates of US$393.75 million.

“This is an entirely sensible decision and probably an overdue one,” said IDC technology analyst John Jackson.

“Software revenue and the margin profile associated with that is where the focus should have been, and now can be.”

BlackBerry said revenue from software and services was US$156 million in its second quarter, down from US$166 million in the first quarter.

The device business accounted for US$105 million in revenue.

The company also announced chief financial officer James Yersh is leaving on Oct. 1 for personal reasons, and will be replaced by former Sybase executive Steven Capelli.

Excluding large one-time costs, the company said it broke even in its second quarter.

– Contact us at [email protected]

CG

EJI Weekly Newsletter