TORONTO: BlackBerry Ltd will stop making smartphones, handing over production to overseas partners while it turns its full attention to its more profitable and growing software business.
Investors applauded the move, sending shares higher in early trading.
The Canadian company said it had struck a licensing agreement with an Indonesian company to make and distribute BlackBerry-branded devices running on the company’s secure software.
It’s the formalisation of a move long in the making, ever since chief executive officer John Chen took over nearly three years ago and outsourced some manufacturing to Foxconn Technology Group.
BlackBerry, based in Waterloo, Ontario, gained 2.5% in early trading in New York on the news.
Getting the money-losing smartphone business off of BlackBerry’s books will make it easier for the company to consistently hit profitability.
It will still design smartphone applications and an extra-secure version of Alphabet Inc’s Android operating system.
“We are reaching an inflection point with our strategy,” Chen said in a statement announcing quarterly earnings. “Our financial foundation is strong, and our pivot to software is taking hold.”
Although BlackBerry’s latest phone, the DTEK50, was already almost completely outsourced, the move is a big symbolic step for a company that once reached a market cap of US$80bil by selling “crackberries” to business users and regular consumers alike.
BlackBerry ushered in the age of the smartphone, extending work hours well past 5pm years before Steve Jobs unveiled the iPhone.
“It was inevitable at this point; they didn’t have the unit volumes to sustain the business profitably,” said Matthew Kanterman, an analyst with Bloomberg Intelligence.
“This is doubling down on the efforts to focus on software which is really what their strength is.”
In the second quarter, BlackBerry said software and services revenue more than doubled from a year earlier to US$156mil. Fiscal second-quarter adjusted earnings were at break-even, compared with analysts’ estimates for a loss of five US cents. Revenue in the second quarter was US$325mil, falling short of analysts’ projections for US$390mil.
For the full year, BlackBerry expects a loss of five US cents or to hit break-even, compared with what it said was a current consensus of a 15-US cent loss. – Bloomberg
