Blackberry Gambled Big on Android…and Lost

by Matt Klassen on April 4, 2016

blackberry-priv-review-02235When Blackberry unveiled its Blackberry Priv—the first smartphone produced by the once great Canadian mobile titan to sport an Android operating system—everyone knew it was a necessary yet dangerous gamble; necessary in the sense that the company needed Android’s reach to survive, and dangerous in the sense that, even with Android, survival was far from a sure thing.

About the only bright spot in all this was that with the company’s aggressive cost-cutting measures, company CEO John Chen noted that Blackberry would only need to sell three million handsets to break even, down from a previous estimate of 5 million, at an average of $300 a unit in order to break even. Unfortunately with the most recent quarterly numbers, even that reduced figure seems like wishful thinking.

In fact, for the three months ending in February, the once mighty mobile pioneer was only able to sell about 600,000 units and saw sales fall by almost $200 million, with the company reporting $464 million in revenue, far below market expectations of $563 million, and enduring a net loss of $238 million for the quarter, a far cry from the hopeful $28 million profit it eked out during the same quarter last year.

Now that the quarterly numbers are in and we finally can get a sense of just how the Android-powered Priv has impacted Blackberry’s bottom line, one thing is immediately clear, Blackberry gambled big on Android, and it may have just lost it all.

If there’s one lesson Chen is learning through his rocky tenure as Blackberry’s CEO it’s that it’s hard to get tarnish off faded glory. More to the point, it’s hard to be unique in a market where the thing that used to set you apart, enhanced mobile security, is completely ubiquitous and practically mundane.

So it comes as no surprise that after such a failure to make a dent in the smartphone market, even after having played its Android lifeline, that Chen is asking some serious questions about the viability of being in the hardware business.

“If by September I couldn’t find a way to get there… then I need to seriously consider being a software company only,” Chen said in an interview with CNBC, noting that moving to quickly in terminating hardware projects was just as dangerous as waiting too long to move.

But that’s not to say that Chen has already given up on the smartphone market, for while he admitted it would be his ‘duty’ to stop selling phones if his company couldn’t make a profit, he was still hopeful he could turn things around.

“I still believe that we have a shot at it,” Chen told reporters after BlackBerry released fiscal 2016 fourth quarter earnings that showed a drop in revenue on flagging device sales.

“Hopefully, I’m not naïve,” Chen added, echoing the final words of many an over-confident optimist.

It should be said, however, that Chen laid some of the Priv’s failure at the feet of distributors, noting that protracted negotiations with the likes of Verizon and others meant the Priv was late to certain markets, meaning, it seems, that the next quarter could be a more accurate indication of the success or failure of the company’s Android device.

But as Chen noted, the end of its hardware business is by no means the end of Blackberry, as the company is finding traction in the software, security, and data management side of things, looking to acquire new assets in this area, and growing its partnerships in healthcare, financial and legal services. Will that be enough to keep Blackberry around? Maybe, but certainly not as the household name it once was.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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