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‘Inflexion point’ BlackBerry washes hands of hardware biz

Switches to licensing 'secure Android' and apps

Here’s your chance to design your own BlackBerry. BlackBerry today ended its 17-year adventure as a phone-maker with CEO John Chen announcing “a new strategic direction focussed on licensing our secure device software and the BlackBerry brand.”

There will still be BlackBerrys – a new one is imminent - but BlackBerry won’t make them after the transition is complete.

Instead, BlackBerry will sell the brand along with the hardened Android and a suite of Android apps, and take a per-unit royalty. The licensees will handle the burdens of logistics and repair. The first of these licensees has been announced – an Indonesian telco-led JV – and Chen said discussions are underway with licensees in India and China. The Indonesian JV is called BB Merah Putih and led by Tiphone, and BlackBerry is not a member.

Chen said the royalty in Indonesia is fixed, but other negotiations are pursuing a mixed model, such as one based on the price of the device.

“We believe this will increase volume… and [decrease] our need for working capital and capital expenditure related to inventory” said Chen.

It’s debatable how to what extent BlackBerry “makes phones” today – and analysts quizzed BlackBerry on exactly what had changed today.

“We had not outsourced our hardware development. We’ve been developing our own handsets also. We’ll end that activity and work with other partners,” Chen explained.

The numbers show how marginal that activity is to BlackBerry. BlackBerry has already parked its BB10 platform and used reference designs from TCL for its latest phone, the DTEK50. Outgoing CFO James said that the Mobility division booked $105 million in revenue in the last quarter, shifting 400,000 phones, with an ASP (average selling price) of $271 million. The phone division cost BlackBerry $35 million and lost $8 million, down from $21 million in the previous quarter.

BlackBerry announced a further quarterly fall in revenue to $352 million (GAAP: $334 million) for the quarter ending August 30. In the preceding quarter BlackBerry booked $400 million and five quarters ago, before the acquisition of Good, $658 million.

BlackBerry booked 156 million from software and services, $105 million from mobility, and $91 million from its residual SAF (service activation fee) business, which once bagged BlackBerry over $2 billion a year. The software side is healthy: up 44 per cent quarterly and 111 per cent annually, the division boasts a margin of 80 per cent.

However, BlackBerry continued to take big write-downs, which are reflected in the GAAP figures. The company recorded a $123 million write-down of its data centre assets and a further $96 million inventory impairment. In June BlackBerry took a $501 million write-down for asset impairment.

There's a sort of symmetry to the company's history. Research in Motion was founded in 1984, but it was 11 years before it made its first device hardware, the RIM 900, in 1996. The first 'BlackBerry' is considered to be the 850, three years later. 17 years on, here we are today. ®


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