Technology News Report:The Canadian company said on Wednesday that it will shut down its own phone business after the failure of its latest bid to use Google's Android software to stimulate interest. Instead, it will rely on others to design and build the devices to save on capital...
Technology News Report:
It's the nail in the coffin for phones at BlackBerry.The Canadian company said on Wednesday that it will shut down its own phone business after the failure of its latest bid to use Google's Android software to stimulate interest. Instead, it will rely on others to design and build the devices to save on capital.
"The company plans to end all internal hardware development and will outsource that function to partners," CEO John Chen said in a statement.
The decision closes a significant chapter in one of the most storied franchises in phone history. BlackBerry was among the high flyers in the early days of the mobile phones. Legions of "CrackBerry" addicts in the white-collar work force tapped away at its trademark physical keys in the early 2000s.
But like many other companies, BlackBerry failed to anticipate the rise of Apple's iPhone and phones running on Google's Android software, which knocked it back on its heels for the last half-decade. Despite the company's attempts to modernize the BlackBerry software and, in a last-ditch effort last year, to embrace Android, consumers paid little heed to its phones.
It's been a steady descent. In 2009, it controlled a fifth of the phone market, just behind Nokia. Today, it's a fraction of 1 percent.
BlackBerry posted fiscal second-quarter results that saw it swing to a loss of $372 million, or 71 cents a share, from a year-ago profit of $51 million, or 24 cents a share. Revenue fell by a third to $334 million.
Analysts, on average, forecast a loss of 5 cents a share and revenue of $394 million.
Transformation finally takes hold
In 2013, CEO John Chen came into BlackBerry with a mission to transform the company, focusing more on software and services. At the same time, he had to keep a foot in the phone business, which still generated a significant chunk of the company's revenue. Even in the most recent quarter, it accounted for 30 percent of its revenue.
But Chen has always been lukewarm about the phone business. He has said on multiple occasions that he would drop out of phones if that business couldn't generate a profit, which many took as a warning. He also never felt entirely comfortable as a pitchman for the devices. In July, he didn't bother to show up at the unveiling of its Android-powered DTEK 50 phone.
The DTEK 50 was a sign of things to come. The phone was built by Alcatel OneTouch, and is virtually identical to that company's Idol 4. Chen had already signed deals to outsource much of manufacturing to other partners, including getting Foxconn to build some of its phones. But until now, the company has kept significant internal resources devoted to hardware.
Even BlackBerry's final Hail Mary, its embrace of the Android operating system, was the brainchild of veteran phone executive Ron Louks. He assumed that wider access to Android apps, combined with its reputation for security, would turn some heads in the corporate world. It did not. The first Android-powered phone, the BlackBerry Priv, was a high-end premium device that landed with a thud.
Louks left BlackBerry in May. BlackBerry named Ralph Pini, who ran the radio-frequency technology development business at the company, to replace him.
Credit is due to Chen for keeping BlackBerry alive after his predecessor, Thorsten Heins, nearly killed the company himself with his push to create a line of more mainstream-friendly phones running on the revamped BlackBerry 10 operating system.
Heins believed the BlackBerry Z10 could compete against the likes of the iPhone and Galaxy S franchises. Instead, the failure of the Z10 and the successor models spurred many predictions of its demise (including our own).
Chen believes BlackBerry will live on, but focused solely on software.
"We are reaching an inflection point with our strategy," he said. "Our financial foundation is strong, and our pivot to software is taking hold."
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