It’s not news that BlackBerry has been struggling in the smartphone business mainly because of Android and iOS. In a recent interview, BlackBerry CEO, John Chen said that if turnaround efforts fail to catch fortunes, Blackberry will be forced to leave the smartphone market altogether.
He said that the company could also reduce the number of models, discontinue low-end smartphones and focus on devices for professional and governments to bring the smartphone department back to gaining profits. “That’s the most ideal case,” He said. “At a certain point in time, the economics take over”.
Blackberry’s smartphone revenue fell 31 percent to just $263 million in the recent fiscal quarter. Blackberry will be forced to leave the business if the trend continues as the company’s shareholders would not approve of more losses.
Blackberry has already outsourced manufacturing to Taiwan to reduce costs
Chen took over the company over a year and a half ago and since then he has outsourced manufacturing to Taiwanese companies in order to cut costs. The company also allowed other manufacturers to use BBOS on their devices as part of the plan.
Blackberry makes most of its profits from the smartphone business and software business has still a long way to go before it can bring in revenues like the hardware business. Smartphones accounted for nearly half the revenue for the fiscal quarter than ended in February. Recent analyst estimates put Blackberry’s device business proportion to grow this year despite Chen working to double the software sales revenue.
Chen joined when Blackberry’s share was less than 1 percent. He began building and acquiring software that could help secure communications for consumers and businesses. Even with the new focus on software Blackberry has released several new smartphones during his tenure including the Passport, Classic and Leap. Chen believes that devices like Leap won’t bring a lot of profits but may help in building the company’s name. He said it’s hard to compete at the lower-end spectrum with the Chinese and Indian manufacturers and it’s not where Blackberry’s sweet spot lies.
Even in the best case scenario, Blackberry may be forced to only cater to the high end smartphone market
BlackBerry’s main reason to stick with devices is that many professional and government employees require secure devices. Another challenge comes from within the company as employees want to build new devices. Chen said “That has a lot to do with the DNA of the company. A lot of good employees grew up building devices.”