BlackBerry may abandon smartphone business
Those few BlackBerry lovers left could be in for some bad news.
The device that was so addictive that it was dubbed the "CrackBerry" might not have much of a future: Its new chairman and interim chief executive says he wants to emphasize software and services - not devices. That could mean the company might ultimately get out of the business of selling smartphones.
The possible change in strategy comes as Fairfax Financial, BlackBerry's largest shareholder with a 10% stake, said Monday it won't buy the struggling smartphone company and take it private. It said that instead Fairfax and other investors will inject $1 billion as part of a revised investment proposal.
CEO Thorsten Heins is stepping down and John Chen was appointed chairman of BlackBerry's board of directors and interim CEO. Chen, the former CEO of software data company Sybase, said that BlackBerry employees need to start thinking differently about the company and accept that "we're really not in phones but we're in phones for software, for services.''
Chen said he wants to find a CEO with a strong software and services background.
He noted that BlackBerry Messenger, BlackBerry's popular messaging application, has been downloaded by more 20 million users since it became available on Google's Android and Apple's iOS platforms last month. BlackBerry Messenger, or BBM, works like text messaging but doesn't incur extra fees.
"I'd like to find somebody to help me monetize that," Chen said.
Colin Gillis, an industry analyst at BGC Financial, questioned whether that's possible.
"It's like Apple saying we're going to stop making phones and we're going to become an iMessage company," Gillis said.
Gillis said BlackBerry might indeed stop selling phones but noted BlackBerry is already obsolete. He doesn't think current BlackBerry users have to worry though.
"They are not just going to shut the lights off," Gillis said.
The decline of the BlackBerry has come shockingly fast. In 1999, BlackBerry became a game-changing breakthrough in personal connectedness. It changed the culture by allowing on-the-go business people to access wireless email. President Barack Obama couldn't bear to part with his BlackBerry. Oprah Winfrey declared it one of her "favorite things.''
Then came a new generation of competing smartphones, and suddenly the BlackBerry looked ancient. Apple debuted the iPhone in 2007 and showed that phones can handle much more than email and phone calls. In the years since, BlackBerry been hammered by competition from the iPhone as well as Android-based rivals.
This year's much-delayed launch of the BlackBerry 10 system and the fancier devices that use it was supposed to rejuvenate the brand and lure customers. It did not work. Waterloo, Ontario-based BlackBerry recently announced 4,500 layoffs, or 40% of its global workforce, and reported a quarterly loss of nearly $1 billion.
"Sadly I think they are already out of the business after the BlackBerry 10 flop," said Mike Walkley, an analyst with Canaccord Genuity.
Walkley said he believes BlackBerry will focus on its mobile device management business, which allows IT departments to manage different devices connected to their corporate networks
After teaching the world to type on tiny buttons, BlackBerry could soon be leaving the business of making phones - leaving fewer options for a vocal minority still committed to phones with its once popular physical keyboard.
"It's not good, not good at all," said Gord Rosko, the president of GR Communications, a consulting firm in Edmonton, Alberta.Rosko said he had used BlackBerrys for about nine years.
"What I call my fat Polish fingers have a hard time with touch-screen keyboards," he said. "So I'm going to keep using this thing until I can't anymore."
The possibility that BlackBerry would exit the handset business was only re
nforced, when the company announced disastrous financial results, including a quarterly loss of nearly $1 billion. BlackBerry had warned last week that the results would be bad, heightening expectations that it would put less focus on handsets.
In the past few years, most smartphone users have switched to touchscreen models, like the iPhone, with virtual keyboards that appear on a glass screen.
That has left few good alternatives for people like Rosko, especially beyond BlackBerry.
Charles Golvin, an analyst at Forrester who tracks the handset market, said most phones with buttons were inexpensive models aimed at teenagers. Most use slide-out keyboards, but those add extra weight and heft. He offered simple advice for people sticking to a physical keyboard.
"The way you now interact with phones is through touchscreens. Get over it," he said. "Maybe the message isn't just get over it; it's give touchscreens a chance."
Still, the chances that some company will try to pick up BlackBerry's single-digit market share are good. Ted Schadler, Forrester's vice president and principal analyst, said he expected some companies to experiment with keyboards.
"Then there's a big question mark of whether people will go for them," he said.
The experiments may actually come from the companies that overtook BlackBerry in smartphones.
Samsung Electronics, whose Android-based phones are a leader in smartphone sales, has already offered phones with physical keyboards. But more important, it is aggressively going after professionals who were the first adopters of the BlackBerry and who appear to disproportionately remain its final users. This year it introduced Knox, a set of security features for Android aimed at government and corporate users.
Motorola Mobility, as it rebuilds itself under Google's ownership, might also re-enter the keyboard phone market, too. Before the Google takeover, some of its most popular Android phones included a slide-out keyboard.
Golvin said he was skeptical about any company trying to build a high-end smartphone with a physical keyboard. BlackBerry's method of combining a screen and keyboard significantly reduces screen size, he said. The smaller screen often requires developers to tweak their apps to work on the different size, making some reluctant to make apps that work on the phones.
ut more important, Golvin said, is that the overwhelming majority of smartphone users have spoken and found that the downsides of on-screen keyboards - namely, more typos - are outweighed by a variety of other advantages.
While there remains a chance that BlackBerry will continue to churn out handsets, the company's results Friday underscored how big of a challenge that would be. Because the handset business requires a large sales volume to be profitable and to sustain development, many analysts expect BlackBerry to focus its remaining resources on software and services for corporations.
That strategy could change if the company is sold. The company's largest shareholder has made a tentative and conditional offer to buy the 90 percent of BlackBerry's stock it does not own. But many analysts expect BlackBerry to soon leave the business of making phones regardless of the owner.
The loss reported Friday mainly reflected a $934 million write-down of a growing inventory of unwanted BlackBerry Z10 phones, the devices that the company had hoped would restore its fortunes, as well as $72 million in charges related largely to layoffs.
The $1.6 billion in revenue during the three-month period that ended Aug. 31 was much less than the $3 billion that analysts had expected and reflected a 49 percent drop from the first quarter,
Phone sales were just as bad during the period. While BlackBerry said that 5.9 million BlackBerry phones were sold to customers during the quarter, many were from inventory that had been shipped to wholesalers and carriers in an earlier quarter. During the last quarter, BlackBerry shipped just 3.7 million phones. And most of those phones, the company said, were older models that it plans to phase out.
Still, there are the devotees, like Jonathan M. Lindsey, a public affairs consultant in Phoenix.
"I am concerned that I'll have to change the way I do my work," he said.
He said he had tested both an iPhone and an Android phone, and found that neither allowed him to type as quickly as a BlackBerry or manage his email as effectively.
But Lindsey, who said that he was in his early 30s, said that after eight years, he was resigned to the fact that the physical keyboard may soon become a thing of his past.
"I'm not opposed to going through the process of adapting," Lindsey said.
In the past few years, most smartphone users have switched to touchscreen models, like the iPhone, with virtual keyboards that appear on a glass screen.
That has left few good alternatives for people like Rosko, especially beyond BlackBerry.
Charles Golvin, an analyst at Forrester who tracks the handset market, said most phones with buttons were inexpensive models aimed at teenagers. Most use slide-out keyboards, but those add extra weight and heft. He offered simple advice for people sticking to a physical keyboard.
"The way you now interact with phones is through touchscreens. Get over it," he said. "Maybe the message isn't just get over it; it's give touchscreens a chance."
Still, the chances that some company will try to pick up BlackBerry's single-digit market share are good. Ted Schadler, Forrester's vice president and principal analyst, said he expected some companies to experiment with keyboards.
"Then there's a big question mark of whether people will go for them," he said.
The experiments may actually come from the companies that overtook BlackBerry in smartphones.
Samsung Electronics, whose Android-based phones are a leader in smartphone sales, has already offered phones with physical keyboards. But more important, it is aggressively going after professionals who were the first adopters of the BlackBerry and who appear to disproportionately remain its final users. This year it introduced Knox, a set of security features for Android aimed at government and corporate users.
Motorola Mobility, as it rebuilds itself under Google's ownership, might also re-enter the keyboard phone market, too. Before the Google takeover, some of its most popular Android phones included a slide-out keyboard.
Golvin said he was skeptical about any company trying to build a high-end smartphone with a physical keyboard. BlackBerry's method of combining a screen and keyboard significantly reduces screen size, he said. The smaller screen often requires developers to tweak their apps to work on the different size, making some reluctant to make apps that work on the phones.
ut more important, Golvin said, is that the overwhelming majority of smartphone users have spoken and found that the downsides of on-screen keyboards - namely, more typos - are outweighed by a variety of other advantages.
While there remains a chance that BlackBerry will continue to churn out handsets, the company's results Friday underscored how big of a challenge that would be. Because the handset business requires a large sales volume to be profitable and to sustain development, many analysts expect BlackBerry to focus its remaining resources on software and services for corporations.
That strategy could change if the company is sold. The company's largest shareholder has made a tentative and conditional offer to buy the 90 percent of BlackBerry's stock it does not own. But many analysts expect BlackBerry to soon leave the business of making phones regardless of the owner.
The loss reported Friday mainly reflected a $934 million write-down of a growing inventory of unwanted BlackBerry Z10 phones, the devices that the company had hoped would restore its fortunes, as well as $72 million in charges related largely to layoffs.
The $1.6 billion in revenue during the three-month period that ended Aug. 31 was much less than the $3 billion that analysts had expected and reflected a 49 percent drop from the first quarter,
Phone sales were just as bad during the period. While BlackBerry said that 5.9 million BlackBerry phones were sold to customers during the quarter, many were from inventory that had been shipped to wholesalers and carriers in an earlier quarter. During the last quarter, BlackBerry shipped just 3.7 million phones. And most of those phones, the company said, were older models that it plans to phase out.
Still, there are the devotees, like Jonathan M. Lindsey, a public affairs consultant in Phoenix.
"I am concerned that I'll have to change the way I do my work," he said.
He said he had tested both an iPhone and an Android phone, and found that neither allowed him to type as quickly as a BlackBerry or manage his email as effectively.
But Lindsey, who said that he was in his early 30s, said that after eight years, he was resigned to the fact that the physical keyboard may soon become a thing of his past.
"I'm not opposed to going through the process of adapting," Lindsey said.
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