28 September 2016
Early Wednesday BlackBerry reported a fiscal second-quarter net loss of $372 million, forcing its CEO John Chen to declare that “the company plans to end all internal hardware development.”
This development has been a long time coming going by John Chen’s statement last year that the company would exit the smartphone hardware business if it could not find a way to make it profitable.
It is worthy to note, however, that BlackBerry brand smartphones will continue to be released, at least for now, but BlackBerry will no longer develop them in-house.
Instead, the company will concentrate on smartphone software and partner with other companies that will build and release hardware.
The first of such partnership produced Blackberry’s most recent smartphone – a re-branded Alcatel smartphone called the BlackBerry DTEK50.
John Chen’s justification for this move is that it will allow Blackberry to “reduce capital requirements and enhance return on invested capital.”
Chen added: “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-on-year and delivered the highest gross margin in the company’s history.”
Though BlackBerry declared a huge loss, its shares jumped by 5 per cent in Wednesday’s pre-market session on news that it is shutting its handset business.
This looks like the best move for BlackBerry at this stage of its life cycle given the enormous competition it now faces with the likes of Apple and Samsung. If managed well, the brand can bounce back even stronger.