Why BlackBerry won't save its hardware business

BlackBerry’s phone business is struggling, and with a make-or-break deadline looming, history is not on the company’s side.

BlackBerry sold about 600,000 phones in the quarter ending Feb. 29, and hardware revenue was down nearly 40% for the fiscal year. Those results led CEO John Chen to say on CNBC he would “seriously consider” BlackBerry becoming a software-only company. He set a September deadline for BlackBerry’s hardware business to turn a profit before discontinuing it completely.

The chances of BlackBerry meeting this deadline are very slim, said Jack Narcotta, industry analyst at Technology Business Research in Hampton, N.H.

“It’s been a long time coming, and it shouldn’t surprise anyone,” he said.

Some experts have said BlackBerry’s first Android-powered smartphone, the Priv, could turn around the company’s faltering hardware business. Chen insisted in the TV interview that people who have bought the Priv have praised it.

That gives Chen hope for the hardware business, but the market for the privacy-focused device is not developing as fast as he would like, he said. He pegged the low sales on the device’s price of $699 and the distribution needing to “beef up a little bit.” (BlackBerry reduced the price tag Tuesday; the Priv will now cost $649 if bought directly from the company.)

On the flip side, BlackBerry’s software and services business grew to account for 32% of the company’s overall revenue. At $494 million, that is double the previous fiscal year’s software revenue.

A big boost came when BlackBerry closed its $425 million acquisition of Good Technology, a former enterprise mobility management (EMM) competitor, in November. The deal doubled BlackBerry’s EMM market share, making it the largest EMM vendor in the industry, according to the most recent IDC numbers from June 2015.

If BlackBerry ends up abandoning hardware, it will be able to focus on EMM, which is driving the company, Narcotta said.