Bad! Blackberry To Stop Production Of Phones

BlackBerry announced Wednesday it would halt in-
house production of smartphones, marking the end
of an era for the once-dominant Canadian tech firm.

Ontario-based BlackBerry said it had reached a deal
to outsource production of its phones to an
Indonesian partner, and would instead concentrate
on software and services.

Handsets with the BlackBerry name will be
produced under license by PT Tiphone Mobile
Indonesia Tbk, a statement by the firms said.
BlackBerry, which a decade ago was among the
world’s largest smartphone makers, has seen its
global market share slip to less than one percent as
Apple and Android devices have dominated.

As the market shifted, BlackBerry has sought to
refocus on software, including security applications,
and the latest announcement takes the company out
of the handset market entirely.

“We are reaching an inflection point with our
strategy. Our financial foundation is strong, and our
pivot to software is taking hold,” said chief
executive John Chen, pointing to a doubling of
software revenue in the last fiscal year.

“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.”

The Waterloo, Ontario-based company has made
several efforts in recent years to find new customer
niches as its smartphone handset sales continued
to stagnate in the face of competition.

It had hoped its first Android-operating smartphone
launched last year would help restore the company
to its former glory.

But sales were lackluster.

Earlier this year, BlackBerry announced it was killing
off its Classic smartphone with a physical keyboard

— once the workhorse of the smartphone market —
as part of a modernization of its lineup.
But the company has continued to bleed red,
posting on Wednesday a US$372 million loss in its
second quarter ending August 31.

Revenues also fell to US$334 million, from US$490
million during the same period last year. The
company did not report details on its smartphone
shipments.

– Rebooting BlackBerry –
Some analysts praised the decision to get out of
smartphone sales, at a time when the worldwide
smartphone market has turned relatively flat.

“The devices business has been a distraction for
both BlackBerry and investors for a number of years
now,” International Data Corporation analyst John
Jackson told AFP.

The end is “good news,” he said, noting an uptick
in BlackBerry’s stock price in morning trading.

Shares rose more than four percent to US$8.22 in
New York at 11:00 am local time (1500 GMT). This
price, however, remains far below a five-year high
set in October 2011 of US$23.97.

Originally known as Research in Motion, the
company introduced its first internet-connected
devices in the early 2000s, and earned a dedicated
following of “CrackBerry” addicts.

But its luster faded with the introduction of the
iPhone in 2007 and the large number of low-costs
Android handsets that followed.

By moving out of hardware, BlackBerry can focus
on its various business services such as
messaging, cybersecurity and tracking connected
devices.

Jackson said the move “should help investors,
BlackBerry customers, and the company itself focus
squarely on the software and services business
which is fiercely competitive in its own right, but
also the business that BlackBerry has been in all
along.”

However analyst Michael Walkley at Canaccord
Genuity said the new strategy has risks as well.

“We believe the lowered focus on hardware could
have an adverse impact on its installed base of
loyal BlackBerry hardware customers, potentially
switching to new software and security solutions on
competing smartphones over time,” he said in a
research note.