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NEW YORK—BlackBerry CEO and executive chairman John Chen couldn’t have made it more clear: His company doesn’t worry about its smartphone market share anymore because such statistics are not relevant to BlackBerry’s ongoing future as a security software business.
In a revealing and intimate Q&A interview with reporters here at the third annual BlackBerry Security Summit, Chen said that even as his company now gets most of its sales and revenue from software instead of hardware as it did in its past, smartphones will continue to be part of its offerings until there are no more reasons to sell them.
“Why am I still in the handset business?” he asked. “First of all, if I came to you [and talked about] a billion dollar software company … that is making money … that does [Internet of things] … and that does embedded technology … you would never ask me a question about handsets” and their market share, he said.
Chen even expressed a bit of friendly aggravation about the constant questions from journalists over the last two years about BlackBerry’s continuing move to specialize in software instead of hardware.
Instead of smartphone market share being key to BlackBerry, Chen said that reporters “have conditioned [themselves] that you must ask that question” every time they write about BlackBerry or speak with Chen. “You are sounding like my wife” when she brings up something he might have done wrong in the past, he said with a smile.
From a mathematical point of view, however, it still makes sense to sell smartphones because, despite their lower margin compared with software, they still continue to add to the company’s bottom line, he said.
“You have a piece of business that will never yield the kind of margin that a software business will yield,” so you scale properly and make the most of what you can do, he said. About 39 percent of the company’s revenue comes from software today, compared with about 31 percent from hardware, he added.
And even if the company would eventually decide to drop the sales of its smartphones in the future, it can’t be done overnight, said Chen, because that would adversely affect customers who have been using the devices for many years. “Before you get out, you’ve got to provide a soft landing for your customers. It is a lot more difficult to do than people think.”
Such questions were raised again earlier in July when BlackBerry announced that it is dropping the production of its BlackBerry Classic smartphone, eWEEK reported recently. The demise of the Classic, with its physical QWERTY keyboard, came just a few days after the U.S. Senate revealed its plans to stop offering BlackBerry phones to members after its existing supplies of the company’s handsets are distributed.
The moves, though unrelated, “could offer more support for the widely held industry beliefs that BlackBerry is continuing on a road map that will see it become a mobile security software company in place of its former position as a powerhouse in the enterprise smartphone market just 10 years ago,” wrote eWEEK.
Why BlackBerry CEO Chen Doesn’t Worry About Smartphone Market Share
Not so, Chen said at the security summit. “You media [members] have played it up. The Classic [reaching the] end of its life is a simple thing” as smartphone models get outdated and are replaced, he said. “Apple doesn’t make the iPhone 4 anymore, but no one writes that Apple is getting out of the iPhone business. When we remove products, people start rumoring that the handset is dead or the keyboard is dead.”
If BlackBerry ever does decide to exit handset production of its own, the company could choose to license its designs and products and let another company build and support them, Chen added. “Obviously, that is a different level” of business, he said, but “as long as I can stay in the hardware business and provide a soft landing for customers, I should do that. That’s the type of war I face every day.”
BlackBerry’s fall from dominating the enterprise smartphone market has been swift and stunning. In early 2006, before the first iPhones appeared from Apple, half of all smartphones sold were BlackBerry models. By 2009, though, its share of the global smartphone market was down to 20 percent. The company continues to face growing competition from Apple, Samsung, Google and others.
The company has been having a tough time financially for some while. In late June, BlackBerry reported a net loss of $670 million for the first quarter of fiscal 2017, compared with a net loss of $238 million in the fourth quarter. The company’s GAAP revenue was $400 million, while its non-GAAP revenue was $424 million for the first quarter.
In April, BlackBerry announced that it would launch two new lower-priced Android smartphone models later in 2016 in an effort to win back customers and increase sales after its flagship, high-end Android Priv phone failed to catch on with buyers as much as the company had hoped. The Priv, which BlackBerry targeted at enterprise customers, might have been priced too high at about $700 when it debuted in September 2015. Earlier in April, BlackBerry dropped the price of the Priv to $649 as it tried to increase sales of the device, which features both a touch-screen and a slide-out physical QWERTY keyboard.