It was a Canadian technological powerhouse, and even asked Alicia Keys to add a touch of glamour and piano to its offer, but Blackberry Limited (NASDAQ:BBRY, TSX:BB) on Wednesday delivered the ultimate bombshell: it is to outsource production of handsets after 14 years in-house manufacture.
The one-time mobile technology pioneer has succumbed to stiff competition from the likes of Samsung’s Android devices and Apple’s iPhone. Today the technology tower commands just 0.1% market share in smartphones.
The 1968 chart hit “Goodbye Blackberry way” by The Move, became more than a reality nearly 50 years later, only this time in the technology world as output moved out.
The company has opted to outsource manufacturing of hardware, and it is possible that its very rivals may get a slice of the action, just as iPhone chips used to be made by rival Samsung. Blackberry will instead focus on software development.
John Chen, the company’s executive chairman and chief executive, said earlier this year that by September he would know if the loss-making handset business would become profitable. True to his word, he has delivered his verdict.
The business was already struggling when in June it recorded a US$670mln net loss in the first quarter of its 2017 financial year, compared to a lean US$68mln profit a year earlier. Read more.
BlackBerry shares rose in pre-market trading after it announced better-than-expected earnings for the second quarter and revised up earnings expectations for the full year to a range of zero to five cents a share, compared with current market expectations of a 15-cent loss.
The momentum was carried through the session and on Nasdaq BlackBerry shares closed up 5.7% at $8.33 and in Toronto up 4.1% to C$10.84.
For nearly a decade, the company, formerly known as Research In Motion Ltd, was the doyen of corporate leaders and is critically acclaimed for being a provider of secure and high reliability software for industrial applications and mobile device management long before WhatsApp began encrypting messages this year following Apple’s (NASDAQ:AAPL) stand-off with the FBI over contents of a San Bernardino suspect’s iPhone. QNX, a subsidiary of BlackBerry, is widely recognised as a leader in automotive software industry.
But attempts by Saudi Arabia to shut down messaging on BlackBerrys if it could not vet them led to questions about just how good the security really was.
But worse still, the phones just could not keep pace with the slicker designs of touchscreen phones from rivals.
BlackBerry was synonymous with the roll ball navigation and was a latecomer to touchscreens.
Perhaps its biggest failure was to understand the metrics of the nascent smartphone market. Those working professionally were increasingly asking why they need a work mobile phone and a personal mobile phone.
The poor quality of optics on BlackBerry made their photo capture inferior to rival’s phones. Yet users increasingly were trying to use their phones for work in the week, and recreation at the weekend. The consumer products just didn’t keep up with other makers of phones.