BlackBerry CEO John Chen has presided over five new phones during his two-and-a-half years running the company, none of which has managed to turn around steadily declining smartphone sales. Some analysts are wondering who would buy a sixth.
BlackBerry is hosting a live online event on 26 July. Although it hasn’t confirmed phones will be on the agenda, Chen said on Tuesday the company would talk about them in the next “week or two” and chief operating officer Marty Beard said last week the next phone launch was “very, very imminent”.
Chen has said he’ll unveil two phones between now and March 2017, both running Google’s Android operating system. A midrange handset selling for about US$350 (about R5 000 before duties and other taxes) is scheduled to arrive before September.
It’s a response to tepid demand for its first Android-powered phone, the high-end Priv, which Chen said had a limited audience. In Chen’s first full quarter as CEO, which ended on 1 March 2014, BlackBerry sold 1,3m phones. In the most recent quarter, it sold 500 000.
A new phone highlights an apparent contradiction for BlackBerry: the company has consistently said its future lies in sales of security-focused software, which recently overtook hardware as the dominant source of revenue, yet it keeps coming up with new phones. This despite the fact that some analysts say the company should cut the money-losing hardware business altogether.
“A lot of people are looking at it and saying ‘Wow I don’t know why they’re even in that business,’” John Butler, a senior analyst at Bloomberg Intelligence, said by phone. Chen “clearly has been struggling to find the right formula for the hardware,” Butler said.
BlackBerry reported fiscal first quarter earnings on 23 June that broke even, compared with the average analysts estimate of a $0,06 loss. Revenue in the quarter was $424m, including software sales of $166m that were 21% higher than the same period last year. Shares of the Waterloo, Ontario-based company have dropped 31% in Toronto this year to C$8,82 for a market value of C$4,6bn ($3,5bn).
The company needs to keep making phones for its most important government and corporate customers who see BlackBerry handsets as the most secure on the market, Chen told journalists on Tuesday at an event in New York to show off its software products. If it cut phones completely, those clients might abandon its software as well, he said.
Hub system
“There’s a certain number of customers that want to have the whole integrated product,” Desmond Lau, a Toronto-based analyst with Veritas Investment Research, said in a phone interview. “They may be trying to milk that for as long as possible in order to ensure that the software revenues are maximised.”
Chen has said he wants the company’s hardware unit to be profitable by September and recently restructured the unit to include revenue generated by licensing some of its hardware-related software like its BlackBerry Hub notification system.
“It looks like they’re trying to make it work in every which was possible,” Lau said. The focus on large business and government clients makes sense since BlackBerry has lost traction with regular consumers, he said.
“They’re not in a position to capture much consumer share just by making another Android device,” he said.
Earlier this month BlackBerry announced it was ending production of its Classic phone, a keyboard-equipped device modeled after the most popular phones from BlackBerry’s heyday in the late 2000s. The announcement came just days after the US senate said it would not provide BlackBerrys to staffers anymore. Chen said he went and spoke to the Senate and explained his plans for the new phones.
“They really want to test out our new products,” he said. “Everybody made it sound like we’re getting out of the handset business. It could be wishful thinking on some peoples’ part but it’s not true. Not yet at least.” — (c) 2016 Bloomberg LP
