BlackBerry kills its phone manufacturing business

BlackBerry stops making phonesIt’s official. BlackBerry Ltd, the Canadian company that invented the smartphone and addicted legions of road warriors to the “CrackBerry”, has stopped making its iconic handsets.

Finally conceding defeat in a battle lost long ago to Apple Inc and Samsung Electronics Co, BlackBerry is handing over production of the phones to overseas partners and turning its full attention to the more profitable and growing software business.

It’s the formalization of a move in the making since Chief Executive Officer John Chen took over nearly three years ago and outsourced some manufacturing to Foxconn Technology Group.

Getting the money-losing smartphone business off BlackBerry’s books will also make it easier for the company to consistently hit profitability.

“This is the completion of their exit,” said Colin Gillis, an analyst at BGC Partners. “Chen is a software CEO historically. He’s getting back to what he knows best: higher margins and recurring revenue.”

Chen should be able to execute his software strategy as long as he keeps costs in line and maintains cash on the balance sheet, Gillis said.

BlackBerry said it struck a licensing agreement with an Indonesian company to make and distribute branded devices. More deals are in the works with Chinese and Indian manufacturers. It will still design smartphone applications and an extra-secure version of Alphabet Inc’s Android operating system.

“I think the market has spoken and I’m just listening,” Chen said in a discussion with journalists. “You have to evolve to what your strength is and our strength is actually in the software and enterprise and security.”

The new strategy will improve margins and could actually increase the number of BlackBerry-branded phones sold, Chen said, as manufacturers license the name that still holds considerable sway in emerging markets like Indonesia, South Africa and Nigeria.

Bloomberg

Leave a Reply

%d bloggers like this: