It is the end of an era folks, although it was so gradual that we were almost waiting for it to arrive. Former smartphone giant BlackBerry has announced that it will no longer make the hardware for its own smartphones. The company will now outsource all manufacturing related work to its development partners and will focus its attention upon software and enterprise services.
The disclosure was made during BlackBerry’s financial result announcement for the quarter that ended on August 31, 2016. While it might comes as a sad piece of news to fans who were hoping for the once smartphone giant to pick things ups, its not really a bolt from the blue. Earlier this year, CEO John Chen had said that if the hardware division continued to come up with patchy results, he would have no choice but to shut it down,
According to the press release that BlackBerry has put out for the Q2 fiscal 2017, its Mobility Solutions division has posted an $8 million loss. This is in sharp contrast to its enterprise software and services business, which appears to be doing exceedingly well for the most part.
Our new Mobility Solutions strategy is showing signs of momentum, including our first major device software licensing agreement with a telecom joint venture in Indonesia. Under this strategy, we are focusing on software development, including security and applications. 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.
That does not in any way mean that the company won’t be launching new devices. That would have been pure dismal considering that BlackBerry recently broke the taboo and took Android on-board its devices. The company may still launch smartphones however, they will be manufactured by third-parties and not Blackberry itself.
The company appears to have embarked upon this strategy before making its intentions public. It ha already launched the re-purposed, TCL manufactured DTEK50 smartphone under its own umbrella. What’s more, the company has also licensed its name to an Indonesian firm, enabling it to make and market BlackBerry-branded devices in the region.
So what’s next? While the company may continue to launch re-purposed smartphones, the focus has clearlt shifted to software. The company has moved on beyond the simple high security, encrypted devices it used to offer and much of its ecosystem is now available for purchase on other Operating systems as well. The company is also custom creating hardware-software packages to solve relevant problems.
We are reaching an inflection point with our strategy. Our financial foundation is strong, and our pivot to software is taking hold. In Q2, we more than doubled our software revenue year over year and delivered the highest gross margin in the company’s history. We also completed initial shipments of BlackBerry Radar, an end-to end asset tracking system, and signed a strategic licensing agreement to drive global growth in our BBM consumer business.
Meanwhile, its certainly the end of an era. Once a major entity in the smartphone industry, the company had fallen upon bad times lately. At its peak, BlackBerry was shipping up to 20 percent of all smartphones globally and also had almost 40 percent share of the US market (according to OS used). However, the figures have fallen drastically and unable to keep up with Android and iOS, BlackBerry’s global smartphone market share has fallen to less than 1 percent.
And hence the shift. By pivoting to software and enterprise services, the company has been able to pick itself up. The sector has been paying it good dividends and that is probably the reason why BlackBerry has decided to focus all of its attention on developing it even further. The company will likely lose some of its special clients who have stuck to its devices by virtue of the highly secure and encrypted experience BlackBerry professes to offer — but the company probably feels that the decision to outsource mobile manufacturing, will be worth the loss in the long run.