BlackBerry Ltd. (NASDAQ:BBRY) (TSE:BB) reported huge third quarter losses last week. Despite massive $4.4 billion loss, investors seem have shown faith in CEO John Chen and his strategies. It's very rare for a CEO of a sinking company to come out openly and promise a bright future. But BlackBerry Ltd. (NASDAQ:BBRY) (TSE:BB) still has a long way to go before the company turns profitable, a feat John Chen expects to achieve by 2016.
Todd Haselton of TechnoBuffalo says that BlackBerry Ltd. (NASDAQ:BBRY) (TSE:BB) can become profitable if the company follows a clear roadmap. The Canadian company sold 4.3 million smartphones in Q3. And most of them, 3.2 million to be precise, were BB7 devices. It means the sales of high-end BB10 devices such as Z10, Q10 and Z30 have been poor. So, BlackBerry Ltd. (NASDAQ:BBRY) (TSE:BB) should drop the expensive BB10 smartphones, at least for the time being, and focus entirely on BB7 in developing markets. In emerging markets, BB7 smartphones are still doing better than BB10 devices.
John Chen announced last Friday that BlackBerry Ltd. (NASDAQ:BBRY) (TSE:BB) has signed a five year deal with Foxconn Technology Co. Ltd (TPE:2354) (OTCMKTS:FXCOF). They will jointly design and develop a low-cost smartphone codenamed Jakarta. This device will be launched in Indonesia in April 2014. In an interview with CNBC, CEO John Chen said he observed that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)'s handset volume was declining, and fixed costs were far too high. The deal with Foxconn Technology Co. Ltd. (TPE:2354) (OTCMKTS:FXCOF) will help the Canadian company bring down costs. It will also reduce the risk of inventory pile-up because the Taiwanese vendor will be handling inventory.
BlackBerry Ltd. (NASDAQ:BBRY) (TSE:BB) needs to remain focused on software and services. John Chen has been pushing the latest version of BES as the best option for IT companies that require support for a number of operating systems for their BYOD efforts. The company is also improving its BBM messaging service to turn into a successful mobile social app for Android and iOS.
BlackBerry shouldn't compete with iPhones and Galaxy
Moreover, cost cutting will be one of the most important steps in BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)'s road to recovery. Layoffs are likely to continue next year, especially if the company decides to reduce or stop the production of high-end smartphones. BlackBerry Ltd. (NASDAQ:BBRY) (TSE:BB) shouldn't attempt to compete with flagship devices from Apple Inc. (NASDAQ:AAPL), Samsung and HTC. At least not until it has established itself in the low cost market.