BlackBerry to leave smartphone hardware business by end of February

WATERLOO, Ont. – BlackBerry is heeding calls to leave the smartphone hardware business that once helped forge its reputation as a global technology leader before it got swept aside by the likes of Apple and Samsung.

The company said Wednesday it will stop designing its signature devices and outsource that work to external partners so that it can focus on its growing security software operations.

“We believe that the phone market is evolving more and more into the intelligence market,” chairman and CEO John Chen told a media roundtable in BlackBerry’s home base of Waterloo, Ont.

“It’s really more about (the) smart of a smartphone, not about the phone of a smartphone.”

The announcement builds on BlackBerry’s gradual departure from the hardware market. It had previously outsourced the manufacturing of its phones to two companies, and the design of its most recent phone — the DTEK50, which began shipping last month — was done externally.

Chen said the new strategy will be complete by Feb. 28, when BlackBerry’s financial year ends, and will cut expenses by eliminating the need to carry inventory, as well as reducing staff and equipment costs.

Fewer than 100 employees will lose their jobs as a result, he said.

Once a symbol of corporate power, the BlackBerry device lost favour as rivals such as Apple’s iPhone pushed their way into the market.

In recent years, BlackBerry sales floundered. On Wednesday, Chen said BlackBerry sold about 400,000 smartphones, including the DTEK50, for an average price of US$271. Three months earlier, Chen said 500,000 of the devices were sold at an average cost of US$290.

It tried mounting comebacks in the handset market, most recently with the release of the Priv and the DTEK50, both of which used the Android operating system.

Chen said he still has one BlackBerry-designed smartphone with a keyboard under wraps, though he hasn’t yet decided whether it will be released.

Even if that device, a next-generation DTEK phone, never makes it to store shelves, Chen said Canadians will be able to purchase new BlackBerry-branded phones made and designed by other companies through licensing agreements. Those phones will be required to use BlackBerry’s operating system and either display its branding or a tag line informing users its powered by BlackBerry (TSX:BB).

“You as a consumer, you will see no difference whatsoever,” he said. “We will take some of these phones and distribute it in Canada.”

BlackBerry will retain portfolio veto rights, meaning that if phones designed under those licensing agreements don’t meet the BlackBerry brand standards, the company can stop their release, Chen added.

The company also announced Wednesday that it signed its first major device software licensing agreement with a telecom joint venture in Indonesia.

Under the deal, the BB Merah Putih joint venture would manufacture, distribute and promote BlackBerry-branded devices running the company’s secure versions of Android software and applications for the Indonesian market. Other agreements are in the works for China and India, Chen said.

Earlier in the day, BlackBerry released results that showed continuing losses. The company, which reports its earnings in U.S. dollars, says it had a $372 million net loss in the second quarter ending Aug. 31, equivalent to 71 cents per share, but broke even after excluding certain items.

Revenue was $334 million or $352 million after adjustments. That was below analyst estimates of $391.75 million.

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