The Canadian company may have once dominated the mobile phone business, but BlackBerry has now announced that it will shut down its phone business.
After 14 years making its own hardware, BlackBerry will now outsource the manufacturing of its handsets. The company has struggled to adapt to the changing situation in the mobile phone business, where Apple and Samsung have come to dominate.
BlackBerry handsets were once highly prized among professionals as they gave you access to emails while you were out and about. However BlackBerry has lost out to its rivals as consumers increasingly use touch screen devices.
The company will instead focus on its profitable software business.
“We are focusing on software development, including security and applications,” said John Chen, the company’s executive chairman and chief executive. “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.”
Earlier this year Chen announced that September would be the time that he would know if the handset business would become profitable again.
IDC analyst John Jackson said that the decision was “entirely sensible and probably overdue.”
“Software revenue and the margin profile associated with that is where the focus should have been, and now can be,” he added.
According to CMC Markets the announcement marks the end of an era. At its peak in September 2013 there were 85 million people subscribed to BlackBerry around the world. That number had fallen to 23 million by March 2016 as the company lost ground to Android and iOS operating systems.
People fell in love with the physical keyboards offered by BlackBerry, but they eventually fell out of fashion. Its market share has fallen to less than 1% in the United States and around the world, according to IDC research manager Ramon Llamas. The fall in user rates has seen the company abandoned by the developers of leading apps such as WhatsApp, who ceased support for the BlackBerry operating system.
The company has tried its best to reinvigorate its hardware business with a number of new handsets. Earlier this year it released the high-end Priv smartphone that runs on Android rather than the BB10 operating system.
While the device had the physical keyboard so beloved of BlackBerry fans, it failed to gain much traction. “We’ve seen more returns than we would like,” an unnamed AT&T executive told CNET.
CEO Chen put a lot of work into reviving the hardware business, with the big square Passport phone at least grabbing the attention. There was even a Classic model that took design cues from the design of the BlackBerry bold, but it all proved to be too little too late.
“BlackBerry can’t keep producing its own phones indefinitely just to serve a small subset of its clients addicted to its home-grown devices,” consultant Ben Wood told the BBC. It seems that the decision has finally been taken, leaving the company free to focus on other areas of its business.
“Today marks a big transition for BlackBerry and the end of an era for the company. The company plans to shift its focus fully to communications and security software development, reducing capital requirements and increasing margins,” said Colin Cieszynski, chief market analyst at CMC.
In pre-market trading shares in the company rose as BlackBerry revealed better-than-expected earnings for Q2. It also revised up earnings expectations for the full year to between 0-5 cents per share. That is compared with the 15 cent loss currently predicted by the market.
According to Cieszynski traders were not flustered by a revenue shortfall, which came in lower than expected at $352 million. “Traders have decided to focus on the 89% revenue growth over the year in their software services business,” he said.
Alongside its financial results BlackBerry also announced the departure of chief financial officer James Yersh for personal reasons. Yersh will leave the company at the end of October, to be replaced by former Sybase executive Steven Capelli.
BlackBerry will now join Palm and Psion in the retirement home for legacy brands. However, just like Nokia, the BlackBerry name will continue to evoke powerful memories for many people. If you were one of those 85 million BlackBerry subscribers, today may mark a sad day. However the handsets will be remembered fondly by anyone who has ever complained of “BlackBerry Thumb.”
