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BlackBerry CEO Would Consider BBM Sale, Spinoff in Future

BlackBerry Ltd. (BBRY) Chief Executive Officer John Chen said he’d eventually consider spinning off or selling the smartphone maker’s BlackBerry Messenger service once he’s built it into a more formidable competitor.

“Running a public company, anything to help our shareholders I need to take a very serious look at,” Chen said in an interview today with Bloomberg Television at the Mobile World Congress in Barcelona. “Today I think we need to build up that base and build up the innovation model.”

Chen’s renewed focus on the instant-messaging service, known as BBM, and the company’s business users has sparked a prolonged rally in the stock, which continued last week after Facebook Inc. (FB) agreed to pay $19 billion for rival service WhatsApp Inc. Chen, a former SAP AG (SAP) executive who joined BlackBerry in November, today unveiled a new encrypted version of BlackBerry Messenger, aimed at its core of security-minded customers.

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“The potential is going to be huge,” Chen said of BBM. “Until we get to the point that we can showcase that potential it is a bit too early to think about getting our $19 billion.”

BlackBerry rose 7.8 percent, the most in more than a month, to $10.60 today in New York. The stock had climbed 32 percent this year before today, and bets against BlackBerry fell this month to the lowest in a year, according to data on short interest compiled by financial-information provider Markit.

Photographer: Simon Dawson/Bloomberg

BlackBerry Ltd. Chief Executive Officer John S. Chen said in an interview, “Nobody has a secure messaging infrastructure and we’re the only ones who have it.” Close

BlackBerry Ltd. Chief Executive Officer John S. Chen said in an interview, “Nobody has... Read More

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Photographer: Simon Dawson/Bloomberg

BlackBerry Ltd. Chief Executive Officer John S. Chen said in an interview, “Nobody has a secure messaging infrastructure and we’re the only ones who have it.”

WhatsApp Deal

Facebook made its biggest acquisition ever to acquire WhatsApp and its more than than 450 million users, highlighting what BBM could potentially be worth. BlackBerry’s service now has more than 85 million active monthly users, Chen said today. The price Facebook paid for WhatsApp implies a valuation for BBM of as much as $3.6 billion.

The Facebook deal doesn’t change the strategy for BBM, Chen said.

Chen unveiled today in Barcelona the BBM Protected service, which has improved encryption technology aimed at enterprise customers like bankers and traders who have traditionally been its most faithful clients.

“Nobody has a secure messaging infrastructure, and we’re the only ones who have it,” Chen said in the interview. “It’s important that we showcase and use that as a differentiator into the thousands and thousands of enterprise customers.”

User Base

BBM customers interact more frequently with the service because many clients use it for professional purposes, Chen said. The extension of the service to Microsoft Corp.’s Windows Phone platform announced yesterday will give it an additional boost, he said.

“I think you will see a natural progression and uptick of our user numbers,” Chen said. “There is a lot of value in our user base and it’s going to be an asset for the company.”

The Waterloo, Ontario-based company today also released details on the the first two phones to be produced with Foxconn Technology Group. BlackBerry signed a five-year production deal with the Taiwanese manufacturer in December to cut costs and reduce its smartphone inventory risk.

The sub-$200 Z3, also called Jakarta, will start selling in Indonesia in April and then expand to other southeast Asian countries and rest of the world. The Z3 has a 5-inch (12.7-centimeter) display and also has an FM radio that works without an Internet connection.

BlackBerry Roots

In keeping with his pledge to return BlackBerry to its roots, Chen also announced that the new Q20 phone, which has a physical keyboard and also features the ‘menu,’ ‘send’ and ‘end’ buttons. The buttons were dropped in the touch-screen Z10 model and the Q10 version, which had a physical keyboard, and were said to be among the missing features that alienated BlackBerry loyalists and led to disappointing sales.

“We’re building the best of the old and the new -- I call it the Classic -- to go back to the customer base,” the CEO said of the Q20 in the interview.

The Q20 will be available before the end of this year, he said.

While the company continues to release new phones, Chen said he doesn’t anticipate buying another phone business and rather will focus on expanding BBM and its server business for enterprises.

“We have 80,000 customers around the world, we just need them to buy more stuff,” he said. “That’s going to be the basic building block.”

Chen, 55, reiterated that he’s aiming to get BlackBerry to break-even cash flow by the end of the fiscal year that concludes in March 2015, and to become profitable at some point in the following fiscal year.

“It will take us about two years to start steady growth,” he said.

To contact the reporters on this story: Cornelius Rahn in Barcelona at crahn2@bloomberg.net; Hugo Miller in Toronto at hugomiller@bloomberg.net; Caroline Hyde in London at chyde3@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Sarah Rabil at srabil@bloomberg.net

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