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After 14 years, Blackberry is ceasing phone production.
Once synonymous with business users, the Canadian company only sold 400,000 units in its second fiscal quarter of 2016. This amounts to approximately 0.1 per cent of the phones sold during this time globally.
After reporting steep losses yesterday – a 31.8 per cent year-on-year fall – Blackberry has made the decision to shift its focus to software and will outsource the manufacture of hardware to other companies.
John Chen, the company’s executive chairman and chief executive, said: “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.”
During the peak of Blackberry usage in September 2013, there were 85 million BlackBerry subscribers worldwide, but by March 2016 that number had fallen to 23 million as it lost out to the Android and iOS platforms.
Speaking yesterday, Colin Cieszynski, chief market analyst at CMC, said: “Today marks a big transition for BlackBerry and the end of an era for the company. The company plans to shift its focus fully to communications and security software development, reducing capital requirements and increasing margins.”
The timing of this announcement may have come as something of a surprise, but the loss-making phone company had been making shifts away from hardware manufacturing for quite some time. When Chen became CEO in 2013, one of his first moves was to outsource some manufacturing to Foxconn Technology Group in an effort to get the smartphone business off Blackberry’s books.
Colin Gillis, an analyst at BGC Partners, draws a similar conclusion: "This is the completion of their exit. Chen is a software CEO historically. He’s getting back to what he knows best: higher margins and recurring revenue."
This is a move which has been received well by investors, as BlackBerry shares gained more than five per cent on the Toronto Stock Exchange following the announcement.
