[Corbu]

BlackBerry CEO would consider handset unit sale, eyes investments | Reuters

NEW YORK Wed Apr 9, 2014 7:45pm EDT

(Reuters) - BlackBerry Ltd would consider exiting its handset business if it remains unprofitable, its chief executive said on Wednesday, as the company looks to expand its corporate reach with investments, acquisitions and partnerships.

"If I cannot make money on handsets, I will not be in the handset business," John Chen said in an interview, adding that the time frame for such a decision was short. He would not be more specific.

Chen, who took the helm of the struggling smartphone company in November, said BlackBerry was also looking to invest in or team up with other companies in regulated industries such as healthcare, and financial and legal services, all of which require highly secure communications.

The chief executive said small acquisitions to strengthen BlackBerry's network security offerings were also possible.

EDIT: Bloomberg has also published a piece on BlackBerry tonight. Seems more thoughtful than Reuters'. Here is the latest version. It is long but worth it:

http://www.bloomberg.com/news/2014-0...-reliance.html

BlackBerry Ltd. (BBRY)’s John Chen is giving himself two years to overhaul the smartphone maker and offset declining handset demand with sales of software that connects computers with all manner of machines, from cars to heart monitors.

Chen, who took over as chief executive officer in November, is stepping up BlackBerry’s reliance on business customers instead of the smartphones that made the company famous. In the worst-case scenario in which he misses his goal of generating cash flow by this fiscal year, Chen said he’ll have six to eight quarters to replace declining hardware sales with higher-margin software revenue.

“I don’t have a plan to get rid of handsets, I have a plan to not be dependent on handsets,” Chen said yesterday in an interview at Bloomberg’s headquarters in New York. “All I need to do is replace the handset revenue, and this company will be very different.”

The shift is the key to Chen’s goal of returning the money-losing company to profit by the fiscal year that ends in March 2016. Chen is in a race against time with device sales continuing to slide -- 77 percent last quarter alone from a year earlier. His plan to create fresh revenue streams from its QNX software and BBM instant-messaging services has been welcomed by investors who’ve driven the stock up 23 percent since he took the helm after a failed sale process.

QNX Purchase

BlackBerry bought QNX in 2010 for $200 million from Harman International Industries Ltd. and set about building a new smartphone operating system, BlackBerry 10, on the software. It’s already widely used in cars and industrial settings like coal mines and hospitals. Now Chen wants to make it more prevalent anywhere machines need to communicate with other machines.

“This is where the industry is going,” Chen said. “It’s all about device interaction. This is why it’s so important to be agnostic.”

Chen said that by replacing single-digit phone margins with software margins that are routinely 70 percent to 90 percent, BlackBerry can be profitable with the same level of revenue. Chen reiterated yesterday that he expects the Waterloo, Ontario-based company to stop losing cash by the end of this fiscal year.

The company is focused on supplying both software and hardware to customers in regulated industries such as finance, government, health care and law who need security, risk management and high productivity, Chen said. About 80 percent of BlackBerry’s installed base of smartphone customers are in a regulated industry, and an even higher percentage of customers dependent on its servers are in such a field, he said.

Restoring Value

Emphasizing this core base of users and technology that caters to them “will be the best way to capture and reverse the decline of our value,” he said.

Chen took over after a plan to sell BlackBerry and take it private had collapsed. He said that he’s focused on making BlackBerry competitive again, not selling the company at a distressed price.

“I’m not running the company for a sale,” Chen said. “I’m running the company to generate value, to grow the business.’

He pointed out that he ran Pyramid Technology Corp. for five years before he sold it and Sybase Inc. for 12 years before SAP AG (SAP) bought it for $5.8 billion in 2010.

Chen inherited a company that had already been losing smartphone market share to Apple Inc. and Samsung Electronics Co. for years. As recently as late 2010, BlackBerry claimed 19 percent of the global smartphone market, according to IDC. By December of last year, it had slipped to 0.6 percent.

T-Mobile Fallout

As the company shifts its emphasis to supplying software and services, Chen recently decided to end BlackBerry’s partnership with T-Mobile US Inc.

In February, T-Mobile started offering to swap new iPhones for old BlackBerrys. Last week, Chen said he won’t renew the supply agreement with T-Mobile, the fourth-largest U.S. wireless carrier, saying that their strategies are ‘‘not complementary.”

“What kind of business person am I when I knowingly am giving a license for a company to move my customers away?” Chen said yesterday in the interview.

Severing ties with BlackBerry critics, cementing loyalties with other carriers and bringing back the older and popular BlackBerry Bold phone have been among the latest steps in Chen’s efforts to restore faith in the company.

“It was easier to do this with T-Mobile,” he said. “They are clearly focused on consumers, and I’m clearly focused on enterprise. So this is a different conversation if it was AT&T (T) or Verizon. (VZ)”

In recent weeks, BlackBerry also has taken legal action to try to stamp out product leaks and just won a court order convincing a judge that Typo Products LLC probably infringed its patents with its clip-on keyboard.

The move to cut ties with T-Mobile wasn’t emotional, he said. It was to send a signal.

“I wanted to make sure the world knows that we are not going to let people push us around,” Chen said.

EDIT #2: It now seems that original Reuters headline was just that, a headline grabber. I strongly urge all of you to listen to what John Chen actually said. The Reuters video unfortunately came out 4 hours after the original 10 line report. What a shame...

The video: http://www.reuters.com/video/2014/04...eoId=306781595

[jaydee5799]

So that means someone else would buy and continue to produce the handsets?

[howarmat]

Not surprising. I still think its the best option. Let someone else deal with that like foxconn and become a software and services company.

[eldricho]

Exactly what I came to think he'll do, even though it hurts to say. I still think he'll look at the Z3 sales and then justify if they'll just let Foxconn do all the hardware work for them, both high end and low end and just end all in house hardware related work

Kinda like OP here said: http://forums.crackberry.com/showthread.php?t=921627

Thanks for posting it up. Those small acquisitions look interesting

Posted via CB10

[webber27]

It's a total non-issue. Let me re-phrase the question and answer: "If handsets keep losing you tons of money, will you continue producing them forever anyway?" "No." Simple as that. Nothing revealing or new worth discussing IMO.

Posted via CB10

[geekl33tgamer]

Now, I get any business will consider cutting a division that doesn't make them money. But, we all know BlackBerry never invest the money in recent years advertising they actually make phones these days. People won't buy something that most don't know exist. They then get into a big contract issue with one of the USA's largest carriers, and end that in a very spectacular "toys out of pram" moment. It looks terrible to anyone in the industry looking in at the moment. Then they say they have sold BBOS 7 services almost 3:1 to BB10 in the last quarter, so were putting the Bold 9900/30 back into production - 3 years later.

Jeez, could write a book on this dam company. So, what's everyone think it means going forward? I guess in the short term, nothing obviously changes, but I doubt they have much comprehension as to how to go about marketing their new toys properly. It's an almost all or nothing approach where the Z3 and Q20 stand sales wise from where I'm sitting. Is this also why there's no news on a high-end all touch device recently, or would more of the business be moved over to Foxconn in the future with someone else at the helm creating new devices.

It's anyone's guess, but I feel like perhaps they may not have learn enough from past misgiving's...

[BKA22]

I really do hope BlackBerry doesn't force me into having to buy an Android for my next device.

Z10

[lnichols]

They need to sell off all of their manufacturing capacity, and move to the Apple of model of design a great device, and let someone else make it. Apple doesn't make most of the products they sell, they design them and have someone else make them and slap their logo on it.

Posted via CB10

[anon(153966)]

Very interesting information on that other thread. Interesting times ahead for BlackBerry and Foxconn.

[donmateo]

I would take this to mean they would outsource all hardware production, not stop making BlackBerry os for phones.

Posted via CB10

[dblcup]

The idea that BlackBerry can't sell phones profitably is completely unnerving to me. They haven't seriously tried to sell BB10 phones since introduction. By that I mean zero marketing and next to zero app development. At the outset they had a ton of cash to invest in driving the sales of their new and great product. They drove nothing... and now consider the possibility that handsets might be unprofitable for them?? REALLY???

Posted via CB10

[FSeverino]

Not surprising. I still think its the best option. Let someone else deal with that like foxconn and become a software and services company.

I think he is sort of leaning in that direction, but is also considering the fact that the reason they haven't turned a profit in a while is because of poor management decisions.

So, if he can still make some devices in house, or at a higher standard, with his own management systems in place that would be the first choice. It might happen now, or it might need to be something they revisit in the future.

One thing is sure, the prices need to drop. If that means Foxconn that's fine, as long as quality doesn't degrade.

Posted via CB10

[BCITMike]

They need to sell off all of their manufacturing capacity, and move to the Apple of model of design a great device, and let someone else make it. Apple doesn't make most of the products they sell, they design them and have someone else make them and slap their logo on it.

Posted via CB10

That is already their business model. They've always had some factory produce it based on their designs, but they don't own the factory.

This is saying they'd get out of designing their own models, so it would be buying someone else's phone and slapping the BB logo on it.

[early2bed]

I don't think any CEO would admit to a short time frame unless the decision has already been made. He's gong around and talking with customers face to face right now. Are you telling me he would say "And by the way, I'm thinking about getting out of handsets sometime this year. So, I'll have my hardware sales guy call you about that big deployment, OK." That would be crazy.

[tjseaman]

He did say handset business not software business. Who knows, maybe he's looking at licencing BB10 software.

Maybe the next new Samsung you buy will run BB10 software.

Either way it's not like my current Z10 is going to stop working. I'm still going to get a Z30 soon too!

Posted via CB10 - Z10 'Powered by BlackBerry'

[sati01]

He didn't talk about selling the handset unit, the quote is:

"If I cannot make money on handsets, I will not be in the handset business," John Chen said in an interview, adding that the time frame for such a decision was short. He would not be more specific, but said it should be possible to make money off shipments of as few as 10 million a year.

It's impossible to sell a business that is losing so much money, they're losing money with each unit shipped. If someone try to rise the price of the phones to cover the cost, sales would sink even more. BlackBerry sold just 1.1 million units of BB10 the last quarter.
I think the Foxconn deal is the last attempt, if that fails in Indonesia which is the best market for BlackBerry, that's the end.

[vpblaze]

He did say handset business not software business. Who knows, maybe he's looking at licencing BB10 software.

Maybe the next new Samsung you buy will run BB10 software.

Either way it's not like my current Z10 is going to stop working. I'm still going to get a Z30 soon too!

Posted via CB10 - Z10 'Powered by BlackBerry'

See I would almost prefer it the other way. Instead of having a Samsung that runs BB10, I would go with a Q10 that runs TouchWiz/Android.
I know I am a minority here. I still miss my hardware keyboard that the Q10 has, and would enjoy a Q10 style phone that has the customization and functionality of Android.


Scribbled on my Note 3 and then translated into readable words using Tapatalk

[donnation]

When the hell is the Z3 supposedly launching? I've heard April, May, does anyone know exactly when it's supposed to be released?

[trsbbs]

This JC guy really knows how to kill a cell phone business.

Go on every media outlets and say "If I cannot make money on handsets, I will not be in the handset business."

Who's gonna buy a BlackBerry phone with it's CEO shooting his mouth off like this.









Posted via Verizon Z10 - OS v10.1.2.2174

[RubberChicken76]

. They haven't seriously tried to sell BB10 phones since introduction. By that I mean zero marketing and next to zero app development.

That is a some serious revisionist history

Posted via CB10

[nabil114]

Not surprising. I still think its the best option. Let someone else deal with that like foxconn and become a software and services company.

It is kind of funny. He is following the analyst's opinion. You would need actual skill to turnaround the business.

[BB10user07]

This JC guy really knows how to kill a cell phone business.

Go on every media outlets and say "If I cannot make money on handsets, I will not be in the handset business."

Who's gonna buy a BlackBerry phone with it's CEO shooting his mouth off like this.









Posted via Verizon Z10 - OS v10.1.2.2174

I cannot figure this one myself...if you are going to sell a unit then just freaking sell it..dont bad mouth it before you sell it...Other than that he is a good

Posted via CB10

[sentimentGX4]

He didn't talk about selling the handset unit, the quote is:

This. I was trying to wrap my head around how Blackberry still intends to sell its handset business after it had publicly put such an effort to offload it last year.

It makes more sense that Blackberry management merely abandon the operation at this point. The use of the logo may be worth money and that's pretty much it coming out of the hardware division.

It's a shame because Blackberry had many interested parties at various points: Microsoft, Amazon, etc. But Blackberry just sat on its phone division for too long and now it may not be worth anything to anyone.

[trwallace]

JC as a CEO has to look at saving the business if that means dumping handsets unfortunately they have to do it. Realistically i dont think any decision has been made yet but it sure seems like they are looking at that. They cant afford to lose more millions just to say they are still in the handset business. its either save the company or keep handsets and go under? Your the CEO what do you choose. Pretty simple mathematics here. They still have to go through with the z3 launch after that its anyones guess. I think they said the 17th of april was launch date. So they probably have a few months of the z3 and then they see how well it is accepted. After that its anyones guess. I wanted to see a cheap keyboard phone as well. Something under the 200 dollar ranged. Keyboard phones are popular in europe. I think if they could get some traction with that and the the fact its not an american company it might be a good seller. Unfortunately US reputation is not always a good thing in many foreign markets . IF they perceive it as something that maybe americans dont like it might actually be a good thing as many foreign markets will buy it just because it is a foreign handset. Lots of different strategies here. I think we are way ahead of ourselves on the discontinuation of handsets. Its something they are looking at but they are also looking at all aspects of the business that dont currently make money. It was funny i was actually at a business meeting in canada and everyone says okay turn off your phones and someone says your blackberries dont you mean. They all say Blackberry who still uses those things? One or two pull out a few q10 and some bolds and i of course pull out my z10 and they say thats a blackberry i said yes and its awesome. OF course everyone rolls their eyes and says yeah right. I guess even in canada blackberry is getting the cold shoulder now. Sad to see. I mostly see samsung and a few iphones but not to many. Thats really a kick in the teeth where the biggest market for blackberry is and its becoming the odd man out. Not a good sign.

[Bluenoser63]

JC as a CEO has to look at saving the business if that means dumping handsets unfortunately they have to do it. Realistically i dont think any decision has been made yet but it sure seems like they are looking at that. They cant afford to lose more millions just to say they are still in the handset business. its either save the company or keep handsets and go under? Your the CEO what do you choose. Pretty simple mathematics here. They still have to go through with the z3 launch after that its anyones guess. I think they said the 17th of april was launch date. So they probably have a few months of the z3 and then they see how well it is accepted. After that its anyones guess. I wanted to see a cheap keyboard phone as well. Something under the 200 dollar ranged. Keyboard phones are popular in europe. I think if they could get some traction with that and the the fact its not an american company it might be a good seller. Unfortunately US reputation is not always a good thing in many foreign markets . IF they perceive it as something that maybe americans dont like it might actually be a good thing as many foreign markets will buy it just because it is a foreign handset. Lots of different strategies here. I think we are way ahead of ourselves on the discontinuation of handsets. Its something they are looking at but they are also looking at all aspects of the business that dont currently make money. It was funny i was actually at a business meeting in canada and everyone says okay turn off your phones and someone says your blackberries dont you mean. They all say Blackberry who still uses those things? One or two pull out a few q10 and some bolds and i of course pull out my z10 and they say thats a blackberry i said yes and its awesome. OF course everyone rolls their eyes and says yeah right. I guess even in canada blackberry is getting the cold shoulder now. Sad to see. I mostly see samsung and a few iphones but not to many. Thats really a kick in the teeth where the biggest market for blackberry is and its becoming the odd man out. Not a good sign.

You don't launch a new product, say we might get out of selling that product in the future and expect sales.