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If current trends continue, BlackBerry devices could become extinct.
In a July interview with Bloomberg, BlackBerry CEO John Chen said it's possible the company could turn away from producing more smartphones if turnaround efforts fail.
BlackBerry device sales revenue was $263 million last quarter, down 31% from $379 million in the same quarter last year. Shuttering the smartphone business could become a reality, if that trend continues for a "long time" and drags down the company's bottom line, Chen told Bloomberg.
It's unclear exactly how much longer BlackBerry will stick it out with its smartphone business, or what kind of financial turnaround it needs to keep things afloat. A BlackBerry spokesperson had no further comment on the company's smartphone plans.
BlackBerry faces an uphill climb, as it pivots away from a hardware focus and moves more towards software and services for enterprise. Hardware accounted for 40% of BlackBerry's revenue last quarter, while services made up 38% -- $252 million -- and software and licensing technology -- $137 million -- hit 21%.
In its last quarterly earnings report, BlackBerry set an aggressive target of $500 million in software and licensing technology revenue during the current fiscal year. Its $137 million in software and licensing revenue for the quarter was up from $54 million a year ago.
However, BlackBerry's share of the enterprise mobility management (EMM) market has trended in the wrong direction compared to competitors. It went from first in EMM market share in 2013 at 14.5% to third in 2014 at 9.5% behind AirWatch by VMware (11.4%) and Good Technology (9.7%), according to IDC's Worldwide EMM Market Shares report released in June.
As part of an effort to keep customers, BlackBerry has introduced initiatives in recent months that expand partnerships with other vendors and venture into new markets. It recently fortified a partnership with Samsung around its KNOX device management technology and purchased enterprise file sync and share vendor WatchDox Inc.
It also introduced a cloud version of BlackBerry Enterprise Service 12 (BES12) earlier this year to appeal to more EMM customers. BES12 version 12.2, released in early July, added support for KNOX Workspace, Android for Work and the Apple Device Enrollment Program.
"What's clear is that BlackBerry is turning into a software provider," said Chris Hazelton, research director for enterprise mobility at 451 Research LLC in New York.
BlackBerry changes smartphone focus
A major hurdle facing sales of BlackBerry devices is the lack of new customers, as the company struggles to hang on to its existing customer base, Hazelton said.
The company recognized revenue on 1.1 million BlackBerry smartphones in the quarter, down from 1.6 million in the same quarter last year. In the earnings report, BlackBerry attributed this downturn to "decreased demand due to intense competition" and its "aging product portfolio."
BlackBerry added that loss was partially offset by several new devices, including the BlackBerry Passport and Classic, both of which sport a QWERTY keyboard.
Chris Hazeltonresearch director, 451 Research
The company's existing customer base is still committed to BlackBerry beyond just smartphones, as some use BES for its EMM needs, Hazelton said.
"BlackBerry can't just walk away from those customers using existing BlackBerry infrastructure," Hazelton said.
The company has taken measures to cut costs in handsets, while still producing new models. It finalized development and manufacturing partnerships last quarter with Wistron Corp. and Compal Electronics Inc. to help BlackBerry reach device business profitability, the company said in its earnings report.
In late 2013, BlackBerry entered into a similar partnership with Foxconn Electronics Inc. to develop and manufacture some of its handsets.
If BlackBerry wants to maintain or increase its hardware business, it will need to "hammer home" its security play not just on devices, but its overall tools portfolio, said Bob O'Donnell, analyst and founder of TECHnalysis Research LLC, based in Foster City, Calif.
One thing BlackBerry could do is create a device that acts as an all-in-one enterprise handset that "becomes your digital ID," O'Donnell said. It would include biometric authentication and potentially replace security cards.
"It makes sense to get people to think about that, and also focus on highly-regulated and secure industries," O'Donnell said.
There also might be an opportunity for BlackBerry to make headway in the burgeoning Internet of Things (IoT) market. It launched its cloud IoT platform earlier this year, and BlackBerry's QNX embedded business system is an asset that could be used in many IoT devices, O'Donnell said.
"IoT is still up for grabs," O'Donnell said. "We're still in the very early days and it's reasonable to say [BlackBerry] has an opportunity there in the future."
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