Chen Poised to Launch New BlackBerry Phone as Sales Keep Slidingby
Announcement may come with live online event next week
Quarterly phone sales have halved since John Chen became CEO
BlackBerry Ltd. Chief Executive Officer John Chen has presided over five new phones during his two and a half years running the company, none of which have managed to turn around steadily declining smartphone sales. Some analysts are wondering who would buy a sixth.
BlackBerry is hosting a live online event on July 26. Although it hasn’t confirmed phones will be on the agenda, Chen said Tuesday the company would talk about them in the next "week or two" and Chief Operating Officer Marty Beard said last week the next phone launch was "very, very imminent.”
Chen has said he’ll unveil two phones between now and March 2017, both running Google’s Android operating system. A "mid-range" handset selling for about $350 is scheduled to arrive before September. It’s a response to tepid demand for its first Android-powered phone, the high-end Priv, which Chen said had a limited audience. In Chen’s first full quarter as CEO, which ended Mar. 1, 2014, BlackBerry sold 1.3 million phones. In the most recent quarter it sold 500,000.
A new phone highlights an apparent contradiction for BlackBerry: the company has consistently said its future lies in sales of security-focused software, which recently overtook hardware as the dominant source of revenue, yet it keeps coming up with new phones. This despite the fact that some analysts say the company should cut the money-losing hardware business altogether.
“A lot of people are looking at it and saying ‘Wow I don’t know why they’re even in that business,’” John Butler, a senior analyst at Bloomberg Intelligence, said by phone. Chen “clearly has been struggling to find the right formula for the hardware,” Butler said.
BlackBerry reported fiscal first-quarter earnings on June 23 that broke even, compared with the average analysts estimate of a 6-cent loss. Revenue in the quarter was $424 million, including software sales of $166 million that were 21 percent higher than the same period last year. Shares of the Waterloo Ontario-based company have dropped 31 percent in Toronto this year to C$8.82 for a market value of C$4.6 billion ($3.5 billion).
The company needs to keep making phones for its most important government and corporate customers who see BlackBerry handsets as the most secure on the market, Chen told journalists on Tuesday at an event in New York to show off its software products. If it cut phones completely, those clients might abandon its software as well, he said.
“There’s a certain number of customers that want to have the whole integrated product,” Desmond Lau, a Toronto-based analyst with Veritas Investment Research Corp., said in a phone interview. “They may be trying to milk that for as long as possible in order to ensure that the software revenues are maximized.”
Chen has said he wants the company’s hardware unit to be profitable by September and recently restructured the unit to include revenue generated by licensing some of its hardware-related software like its BlackBerry Hub notification system.
“It looks like they’re trying to make it work in every which was possible,” Lau said. The focus on large business and government clients makes sense since BlackBerry has lost traction with regular consumers, he said.
“They’re not in a position to capture much consumer share just by making another Android device,” he said.
Earlier this month BlackBerry announced it was ending production of its Classic phone, a keyboard-equipped device modeled after the most popular phones from BlackBerry’s heyday in the late 2000s. The announcement came just days after the U.S. Senate said it would not provide BlackBerrys to staffers anymore. Chen said he went and spoke to the Senate and explained his plans for the new phones.
“They really want to test out our new products,” he said. “Everybody made it sound like we’re getting out of the handset business. It could be wishful thinking on some peoples’ part but it’s not true. Not yet at least.”