BlackBerry Needs to Leave the Mobile Handset Business: 10 Reasons Why

By Don Reisinger

It’s not hard to justify BlackBerry getting out of the hardware business when one examines its last financial report for the three-month period ended Nov. 30. The company reported hardware revenue of $476 million, representing a 70.7 percent decline compared with the previous year. What’s worse, it could only muster 1.9 million unit sales—a 72.5 percent drop compared with the nearly 7 million units it sold in 2012. That’s not the sign of a company that should be competing in hardware.

There’s nothing to be found in BlackBerry’s financials that would indicate a resurgence is under way or even about to start. In fact, BlackBerry itself said in its financial statement that it expects its hardware business to continue to decline for the foreseeable future and that it would only focus on enterprise customers going forward in the hope that that market would swing back in its direction. The sheer lack of certainty is enough to make anyone suggest it’s time for BlackBerry to move on.

Although BlackBerry would like to focus on the enterprise, it’s not clear how the company will actually attract new enterprise customers. With the bring-your-own-device (BYOD) trend sweeping the globe, consumers are bringing in smartphones running iOS and Android, not BlackBerry. Even the White House, where BlackBerry phones were favored by President Barack Obama and his staff, is now evaluating other handsets, according to a recent report. Meanwhile, enterprise IT managers are starting to determine that developing proprietary apps for iOS or Android is worth the effort. All of the bad news appears to be lined up to hurt BlackBerry’s chances in the enterprise.

BlackBerry announced a deal to outsource handset manufacturing to China’s Foxconn. BlackBerry hopes this move will reduce costs and get new designs into the market faster. Still, BlackBerry needs to pay Foxconn to produce its products, and there’s no guarantee that the effort will actually generate stronger margins on its device sales. The Foxconn deal looks more like a shot in the dark than a fully realized plan. If it doesn’t produce results, it’s another reason BlackBerry needs to leave the hardware space.

It wasn’t necessarily all bad news in BlackBerry’s latest financial report. The company says that BlackBerry Enterprise Server is actually on the upswing and BlackBerry Messenger (BBM) continues to be a hit on third-party platforms. Although software and services revenue was down year-over-year, there’s ample good news to justify BlackBerry focusing its efforts in those markets. After all, if BlackBerry can build up BBM even more, that business alone could be worth billions. Just look at its competitor, WhatsApp, for proof of that.

BlackBerry is sitting on intellectual property that could be worth a ton of cash to the company. By becoming a software and services firm that also licenses intellectual property in the mobile market to hardware makers, BlackBerry could find a whole new revenue source and improve its operational efficiency. Hardware is a drag on its financials, but licensing all the things it owns related to product design would only help its bottom line.

BlackBerry last year made a massive marketing push to get folks to buy into the idea that its products were worth buying. The company relied on celebrities and consumer-focused ad campaigns to get the word out, but the entire effort failed. If BlackBerry can’t convey the message that would make people want to use its products, how can it expect to sell much hardware?

Rumors were swirling last year that Lenovo was considering buying BlackBerry’s hardware business. Although that never happened and Lenovo eventually bought Motorola, the company is still flush with cash and obviously wants to make a splash in the smartphone market. It’s entirely possible—especially as BlackBerry sales continue to falter—that Lenovo will come calling and offer to take the dying beast off BlackBerry’s hands.

It seems that every discussion on BlackBerry misses a key component in the company’s product mix: its network. The BlackBerry network could be a huge revenue stream for the company, allowing carriers to offload some of their costly data onto its network for a fee. BlackBerry has done some of that around the world, but it has lost sight of that business model. It’s a mistake that needs to be addressed. Maybe getting hardware out of the way will help BlackBerry focus on those things that might actually prove profitable.

It seems impossible from this vantage point that BlackBerry will be able to find a way to overcome the perception that it’s offering a product that is old, outdated and unnecessary. Long gone are the days of the “Crackberry.” Now, folks chuckle when they come across the few people who are still using BlackBerry devices. And unless a miracle happens and BlackBerry changes that cultural perception, it’s impossible to see how the company could succeed in hardware over the long term.