BlackBerry, which was once the top smartphone maker worldwide, is exiting the smartphone manufacturing business. Much has been said and written about the historic fall of the Waterloo-based smartphone maker over the past few years. Most recently, Apple CEO Tim Cook commented on its exit.
Apple focused on the opportunity: Cook
The Financial Times asked Cook about BlackBerry’s announcement of ending handset manufacturing.
Cook replied honestly, “I think their sales have been fairly low for a while. We are very focused on the opportunity and we see it as massive.”
The Cupertino-based company is indeed looking for more ways to grow the iPhone line. In recent years, it has been focusing increasingly on enterprise customers. Recently Apple signed an iPhone/iPad roll-out deal with Deloitte.
Since Apple’s remarkable entry into the smartphone market, BlackBerry has been pushed into a much lower place. Yesterday, amid ramping losses, the Canadian firm indicated its intention to stop developing smartphones in-house. The company will focus its efforts on software and security now, leaving hardware to third parties.
BlackBerry stock up after announcement
BlackBerry stock sharply gained after the company announced its decision to leave the business of making and manufacturing smartphones. The famed smartphone maker will now focus on its security and services business, which posted an 89% revenue increase in Q2 over the same period in 2015. In a statement, BlackBerry Chief Executive John Chen said that they are reaching an inflection point with their strategy.
“Our foundation is strong, and our pivot to software is taking hold.”
The smartphone maker is planning to outsource the development and production of its hardware to other vendors. Chen stated that as the result of the decision to exit hardware manufacturing, fewer than 100 jobs would be lost. The change will affect the overall revenue for two more quarters, and thereafter, growth in software revenue will compensate for the drop, the CEO said. For the second fiscal quarter ended Aug. 31, the Canadian firm’s revenue dropped to $334 million from $490 million last year, missing analysts’ estimates of $393.75 million.
“This is an entirely sensible decision and probably an overdue one,” said John Jackson of IDC technology. “Software revenue and the margin profile associated with that is where the focus should have been, and now can be.”
On Wednesday, BlackBerry shares closed up 5.71% at $8.33. Year to date, the stock is down almost 11%, while in the last year, it is up more than 28%.
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