BlackBerry quits smartphone industry to focus on software

Nell Walker
- Lean - Sep 29, 2016

BlackBerry has finally ceased production of smartphones and is turning attention fully to its far more successful software business.

BlackBerry phone sales have been declining since at least 2007, when the iPhone – dubbed the ‘BlackBerry killer’ by the media – was released. This led to an 87 percent drop in BlackBerry stock prices between 2010 and 2013, as iPhone and Android devices firmly took hold of the industry and muscled BlackBerry out of it.

While BlackBerry had been an innovator with its ‘corporate’ brand of phone, touch-screen phones swiftly overtook and the former could not keep up. Now, the business is admitting defeat and stepping out of the sector.

However, this is a success story. BlackBerry now reports 89 percent year-on-year growth in GAAP software and services revenue, and it has a new strategic direction in place. The company is a global leader in securing, connecting, and mobilising enterprises, working with its former smartphone competitors in a new capacity.

John Chen, Executive Chairman and CEO of Blackberry, stated: “We are reaching an inflection point with our strategy. Our financial foundation is strong, and our pivot to software is taking hold. In Q2, we more than doubled our software revenue year over year and delivered the highest gross margin in the company’s history. We also completed initial shipments of BlackBerry Radar, an end-to-end asset tracking system, and signed a strategic licensing agreement to drive global growth in our BBM consumer business.

"Our new Mobility Solutions strategy is showing signs of momentum, including our first major device software licensing agreement with a telecom joint venture in Indonesia. Under this strategy, we are focusing on software development, including security and applications. 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.

"We remain on track to deliver 30 percent revenue growth in software and services for the full fiscal year. We are revising upward our non-GAAP EPS outlook to a range of breakeven to a five cent loss, compared to the current consensus of a 15 cent loss. This reflects increased confidence based on improving margins and reduced interest expense from the recent refinancing of our debt, as well as planned investments in growth areas.”

 

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