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| BlackBerry may exit handset business if it can't make profit, says CEO | BlackBerry may exit handset business if it can't make profit, says CEO |
| (5 months later) | |
| The struggling handset and services company BlackBerry may stop selling handsets if it cannot do so profitably, its chief executive officer John Chen says, as he 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," Chen told Reuters - and said that the timeframe for the decision was "short". | "If I cannot make money on handsets, I will not be in the handset business," Chen told Reuters - and said that the timeframe for the decision was "short". |
| But in a blogpost after the interview he insisted that "I want to assure [customers] that I have no intention of selling off or abandoning this business any time soon. I know you still love your BlackBerry devices… we will do everything in our power to continue to rebuild this business," he added. "Rest assured, we continue to fight." | But in a blogpost after the interview he insisted that "I want to assure [customers] that I have no intention of selling off or abandoning this business any time soon. I know you still love your BlackBerry devices… we will do everything in our power to continue to rebuild this business," he added. "Rest assured, we continue to fight." |
| He suggested to Reuters that it should be possible to make money from as few as 10m shipments per year. That compares to the company's peak in its fiscal 2011 year, when it shipped 52.3m and recorded an operating profit of $4.6bn. | He suggested to Reuters that it should be possible to make money from as few as 10m shipments per year. That compares to the company's peak in its fiscal 2011 year, when it shipped 52.3m and recorded an operating profit of $4.6bn. |
| By contrast in its just-ended fiscal year to the end of February, it shipped 13.7m handsets, but recorded operating losses of nearly $7bn, including around $3.7bn in writedowns on unsold inventory of its newer BB10 handsets. | By contrast in its just-ended fiscal year to the end of February, it shipped 13.7m handsets, but recorded operating losses of nearly $7bn, including around $3.7bn in writedowns on unsold inventory of its newer BB10 handsets. |
| But Richard Windsor of the Radio Free Mobile consultancy warned that "Chen thinks he can make money shipping 10m units a year. This looks like a tall order given that Android vendors Huawei and LG Electronics are struggling to keep their heads above water shipping 50m smartphone units last year." | But Richard Windsor of the Radio Free Mobile consultancy warned that "Chen thinks he can make money shipping 10m units a year. This looks like a tall order given that Android vendors Huawei and LG Electronics are struggling to keep their heads above water shipping 50m smartphone units last year." |
| Windsor suggested that "the [BlackBerry] handset business is likely to fail no matter what [Chen] does. The handset business takes no prisoners when it comes to profitability and BlackBerry is one of the weakest, most vulnerable players out there." | Windsor suggested that "the [BlackBerry] handset business is likely to fail no matter what [Chen] does. The handset business takes no prisoners when it comes to profitability and BlackBerry is one of the weakest, most vulnerable players out there." |
| Chen has already outsourced the manufacture of handsets to Taiwan's Foxconn as a cost-saving measure. | Chen has already outsourced the manufacture of handsets to Taiwan's Foxconn as a cost-saving measure. |
| Pricing advantage | Pricing advantage |
| However BlackBerry could have a pricing advantage as Chen focuses on corporate and government customers, its original core business. Many, including high-level government users, have become highly dependent on its security, which could mean that the company effectively has a captive market. BlackBerry's BB7 and BB10 software is the only one approved for use in more secure government systems for documents above the "Restricted" level. | However BlackBerry could have a pricing advantage as Chen focuses on corporate and government customers, its original core business. Many, including high-level government users, have become highly dependent on its security, which could mean that the company effectively has a captive market. BlackBerry's BB7 and BB10 software is the only one approved for use in more secure government systems for documents above the "Restricted" level. |
| Chen, who took over in November 2013 having previously engineered a turnaround at software company Sybase, 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. | Chen, who took over in November 2013 having previously engineered a turnaround at software company Sybase, 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. |
| Small acquisitions to strengthen its network security offerings were also possible, he said. "We are building an engineering team on the service side that is focused on security. We are building an engineering team on the device side that is focused on security. We will do some partnerships and we will probably, potentially do an M&A [merger and acquisition] on security." | Small acquisitions to strengthen its network security offerings were also possible, he said. "We are building an engineering team on the service side that is focused on security. We are building an engineering team on the device side that is focused on security. We will do some partnerships and we will probably, potentially do an M&A [merger and acquisition] on security." |
| He said security had become more important to businesses and government since the revelations about US surveillance made by former National Security Agency contractor Edward Snowden. | He said security had become more important to businesses and government since the revelations about US surveillance made by former National Security Agency contractor Edward Snowden. |
| Chen acknowledged past management mistakes and said he had a long-term strategy to complement the short-term goals of staying afloat and stemming customer defections. | Chen acknowledged past management mistakes and said he had a long-term strategy to complement the short-term goals of staying afloat and stemming customer defections. |
| "You have to live short term. Maybe the prior management had the luxury to bet the world would come to it. I don't have the luxury at all. I'm losing money and burning cash." | "You have to live short term. Maybe the prior management had the luxury to bet the world would come to it. I don't have the luxury at all. I'm losing money and burning cash." |
| In March, the embattled smartphone maker reported a quarterly net loss of $423m and a 64% drop in its revenues to below $1bn for the quarter, the first time it had been so low since 2007. It also saw cash outflow of around $500m. | In March, the embattled smartphone maker reported a quarterly net loss of $423m and a 64% drop in its revenues to below $1bn for the quarter, the first time it had been so low since 2007. It also saw cash outflow of around $500m. |
| That underscored the magnitude of the challenge Chen faces. | That underscored the magnitude of the challenge Chen faces. |
| Chen said BlackBerry remains on track to be cash-flow positive by the end of the current fiscal year, which runs to the end of February 2015, and to return to profit some time in the fiscal year after that. | Chen said BlackBerry remains on track to be cash-flow positive by the end of the current fiscal year, which runs to the end of February 2015, and to return to profit some time in the fiscal year after that. |
| Lone survivor? | Lone survivor? |
| Windsor warned that without the handset business, BlackBerry will be thrown back onto its pure software and services business - and will be competing with "mobile device management" (MDM) companies such as Airwatch, Mobile Iron and Good Technology, which are all aiming to provide security services for smartphones and tablets used in businesses, but apply them to iPhones and Android phones as well as BlackBerrys. "I doubt whether BlackBerry will survive on its own as a pure MDM vendor," Windsor said. | Windsor warned that without the handset business, BlackBerry will be thrown back onto its pure software and services business - and will be competing with "mobile device management" (MDM) companies such as Airwatch, Mobile Iron and Good Technology, which are all aiming to provide security services for smartphones and tablets used in businesses, but apply them to iPhones and Android phones as well as BlackBerrys. "I doubt whether BlackBerry will survive on its own as a pure MDM vendor," Windsor said. |
| Chen said his long-term plans for BlackBerry included competing in the burgeoning business of connecting all manner of devices, from kitchen appliances to automotive consoles to smartphones. | Chen said his long-term plans for BlackBerry included competing in the burgeoning business of connecting all manner of devices, from kitchen appliances to automotive consoles to smartphones. |
| Chen said he was not sure how long it would take for the "machine-to-machine" or "M2M" world to become a mainstream business, but he said he was sure that was coming. | Chen said he was not sure how long it would take for the "machine-to-machine" or "M2M" world to become a mainstream business, but he said he was sure that was coming. |
| "We are not only interested in managing BlackBerry devices. We are interested in managing all devices that you would like to speak to each other," he said. "To achieve our dream of being a major player in M2M requires more partnerships with others," including telecom companies eager to participate. | "We are not only interested in managing BlackBerry devices. We are interested in managing all devices that you would like to speak to each other," he said. "To achieve our dream of being a major player in M2M requires more partnerships with others," including telecom companies eager to participate. |
| Chen was recruited by the board last November after attempts to find a buyer for the company last summer foundered, and its then-chief executive and former chief operating officer Thorsten Heins was fired, having overseen the late release of BB10-powered phones - which flopped in the market. | Chen was recruited by the board last November after attempts to find a buyer for the company last summer foundered, and its then-chief executive and former chief operating officer Thorsten Heins was fired, having overseen the late release of BB10-powered phones - which flopped in the market. |
| BBM promise | BBM promise |
| Chen said he was not fazed by recent acquisitions of companies offering similar services to BlackBerry Messenger (BBM), such as Facebook's $19bn purchase of mobile messaging service Whatsapp. | Chen said he was not fazed by recent acquisitions of companies offering similar services to BlackBerry Messenger (BBM), such as Facebook's $19bn purchase of mobile messaging service Whatsapp. |
| "We are not going to go up against Whatsapp. We are going to be more focused on secure communications, secure messaging," he said of BBM. | "We are not going to go up against Whatsapp. We are going to be more focused on secure communications, secure messaging," he said of BBM. |
| Chen said he was determined not to lose focus on the corporate and other customers that helped it build its global reach in the first place, and would not be tempted back into the much larger but more fickle consumer smartphone race. | Chen said he was determined not to lose focus on the corporate and other customers that helped it build its global reach in the first place, and would not be tempted back into the much larger but more fickle consumer smartphone race. |
| "We are not going to spend any more money to maintain the latest version of Angry Birds," Chen said, referring to the popular consumer mobile video game. | "We are not going to spend any more money to maintain the latest version of Angry Birds," Chen said, referring to the popular consumer mobile video game. |
| • BlackBerry hangs up on T-Mobile US after spat between chief executives | • BlackBerry hangs up on T-Mobile US after spat between chief executives |