BlackBerry bids goodbye to hardware manufacturing, to focus on software

It was expected sooner than later. Former smartphone giant BlackBerry has called it quits for hardware designing announcing that it will no longer make the hardware for its own smartphones. Instead, the company now intends to outsource hardware making to development partners, and focus on its software and enterprises services.

BlackBerry had already launched one rebranded the third party smartphone handset, the DTEK50, with hardware made by Alcatel — and Google’s Android OS being the software core. So switching entirely to OEM partners is an obvious next step.

Quitting manufacturing will allow the company to reduce capital requirements and enhance return on invested capital, said CEO John Chen. The disclosure was made during BlackBerry’s financial result announcement for the quarter that ended on August 31, 2016.

According to the press release, BlackBerry Mobility Solutions division has posted an $8 million loss which is in sharp contrast to its enterprise software and services business, which appears to be doing exceedingly well for the most part.

“Our new Mobility Solutions strategy is showing signs of momentum, including our first major device software licensing agreement with a telecom joint venture in Indonesia. Under this strategy, we are focusing on software development, including security and applications. The company plans to end all internal hardware development and will outsource that function to partners. This allows us to reduce capital requirements and enhance return on invested capital.”

Chen described Blackberry as reaching an “inflection point with our strategy”, and said its “pivot to software is taking hold”. He also talked up the company’s financial foundation — thanks to growth in its software business, saying it is “on track” for 30 percent revenue growth in software and services for the full fiscal year.

BlackBerry’s best days are clearly behind it. At its peak, BlackBerry was shipping up to 20 percent of all smartphones globally and also had almost 40 percent share of the US market. However, the figures have fallen drastically and unable to keep up with Android and iOS, BlackBerry’s global smartphone market share has fallen to less than 1 percent.

Hence, the realignment. The refocusing has been paying it good dividends and that is probably the reason why BlackBerry has decided to focus all of its attention on developing it even further.