What incentive does BB have to stay in hardware?

This has been discussed perhaps in various threads, but I'm curious, from their perspective, what their reasoning might be to continue making hardware.

For BB10, it was pretty straightforward:
- Make any money (if possible) on the hardware
- Control over BB World and the cut they take from that
- Locking customers into the ecosystem makes it more likely they stick with you later.
- They control any other services, and the advertising and income that goes with it.

For something like the Priv:
- they don't get a cut of the store
- more choices for customers to use non BB services
- No cut of marketing/info from services like maps, etc.
- No lock-in at all from customers. Google controls the ecosystem, not BB.

The only thing I can see is that they get control over security, but that leaves them making money of the hardware, which is a tough proposition.

So if I was the one making those decisions, what incentive is there?

Beyond a DESIRE to make money on hardware, I think having devices to offer fills out BlackBerry's EMM portfolio. Although not essential to their plans, it's nice to be able to offer the complete package.

It's pretty much the only thing that makes them relevant to 99.9% of the population. Look how much hype a new device gets them versus some obscure acquisition.

Posted via CB10

The only reason to currently be in hardware is that they have been in hardware in the past. The BlackBerry of today certainly wouldn't be getting into hardware if they had never done it in the past. That would be like Good launching a smartphone.

Rather than take a big hit in revenue and cost of shutting down hardware, John Chen has elected to do a gradual wind-down of hardware and take advantage of the long tail of sales of legacy devices to governments and enterprises. Essentially, these entities buy old stuff like it isn't going out of style.

BB's issue is that they USED to sell phones, and they had built a company that designed and sold phones. Headcount was VERY big (and, honestly, it still is even after many rounds of cuts) for a company that does what BB is doing today.

Further, investors were used to seeing billions of dollars in revenue moving through the company, and some of the stock price is based on that. While it would have probably been a better financial move to have shut down hardware entirely in 2012, most investors would have freaked out to see BB's revenues plummet and huge swaths of employees and contractors being laid off overnight. BB would have had to have quickly become a small fraction of its previous size - and that's not something people can easily understand, even when it's the smartest move.

Consider that, at the time, many of BB's biggest shareholders had bought into BB at $40 or more per share. These people at least expected BB to try to succeed in the hardware business, because (in their minds) that's what BB was, and that's how they would best stand a chance of getting their money back. Well, those same people have had 5 years to process the news that this wasn't going to happen, and they've seen BB try and fail to compete in hardware, so they have an easier time writing off their investments mentally than if BB had just quit the business back then. I'm sure many investors would have sued BB - even though history shows that it would have been the right move.

Finally, BB's most profitable product is/was BES, and sales of BES were historically locked together with the sales of BB phones - something that didn't really change until 2014 with BES12 (because BES10 sucked out loud). BB simply needed time to bridge that gap, so they had to keep making products that worked with BES or watch BES sales dry up even worse than they already did.

The real root of all of these problems is that RIM didn't have a businessman in charge of the company - they had an engineer (Mike L) instead, and Mike simply didn't have a good handle on the business decisions. He built RIM around the idea that Mike was always right, and that BB would always be important to businesses, and thus BB would have a lot of leverage. When those things were still true (early-mid 2000s), RIM did well, but as they started not to be true anymore, Mike retreated to the safety of Waterloo, where everyone agreed with him (or else), and decided that "smart" companies would recognize that they should stick to BBOS, BES, PKB, and 2G networking solutions. Only "dumb" companies would embrace 3G (much less 4G), VKB, modern touch OSs, desktop-quality browsers, and full-featured mobile apps - none of which he was prepared to offer.

When it finally became clear to him that he was wrong, every aspect of the company had to be changed, because every decision, every contract, every product was built on the assumption that Mike was right. And there simply wasn't time enough to make all those changes - BB had already been hemoraging customers. But, Mike being Mike, decided to go ahead and build his own platform, knowing that would take even more time, bring considerably higher costs to the company, and came with a great risk of developers choosing not to support the platform. He did it anyway, still convinced he was right. And from an engineering point of view, he might have been - but from a business point of view, it was suicidal, and that's why you need a businessman, and not an engineer, running your company.

Originally Posted by Troy Tiscareno

BB's issue is that they USED to sell phones, and they had built a company that designed and sold phones. Headcount was VERY big (and, honestly, it still is even after many rounds of cuts) for a company that does what BB is doing today.

Further, investors were used to seeing billions of dollars in revenue moving through the company, and some of the stock price is based on that. While it would have probably been a better financial move to have shut down hardware entirely in 2012, most investors would have freaked out to see BB's revenues plummet and huge swaths of employees and contractors being laid off overnight. BB would have had to have quickly become a small fraction of its previous size - and that's not something people can easily understand, even when it's the smartest move.

Consider that, at the time, many of BB's biggest shareholders had bought into BB at $40 or more per share. These people at least expected BB to try to succeed in the hardware business, because (in their minds) that's what BB was, and that's how they would best stand a chance of getting their money back. Well, those same people have had 5 years to process the news that this wasn't going to happen, and they've seen BB try and fail to compete in hardware, so they have an easier time writing off their investments mentally than if BB had just quit the business back then. I'm sure many investors would have sued BB - even though history shows that it would have been the right move.

Finally, BB's most profitable product is/was BES, and sales of BES were historically locked together with the sales of BB phones - something that didn't really change until 2014 with BES12 (because BES10 sucked out loud). BB simply needed time to bridge that gap, so they had to keep making products that worked with BES or watch BES sales dry up even worse than they already did.

The real root of all of these problems is that RIM didn't have a businessman in charge of the company - they had an engineer (Mike L) instead, and Mike simply didn't have a good handle on the business decisions. He built RIM around the idea that Mike was always right, and that BB would always be important to businesses, and thus BB would have a lot of leverage. When those things were still true (early-mid 2000s), RIM did well, but as they started not to be true anymore, Mike retreated to the safety of Waterloo, where everyone agreed with him (or else), and decided that "smart" companies would recognize that they should stick to BBOS, BES, PKB, and 2G networking solutions. Only "dumb" companies would embrace 3G (much less 4G), VKB, modern touch OSs, desktop-quality browsers, and full-featured mobile apps - none of which he was prepared to offer.

When it finally became clear to him that he was wrong, every aspect of the company had to be changed, because every decision, every contract, every product was built on the assumption that Mike was right. And there simply wasn't time enough to make all those changes - BB had already been hemoraging customers. But, Mike being Mike, decided to go ahead and build his own platform, knowing that would take even more time, bring considerably higher costs to the company, and came with a great risk of developers choosing not to support the platform. He did it anyway, still convinced he was right. And from an engineering point of view, he might have been - but from a business point of view, it was suicidal, and that's why you need a businessman, and not an engineer, running your company.

Sounds about right.

The BlackBerry Guy