BlackBerry closes in on CEO Chen’s hardware ultimatum
“Software is the new BlackBerry.”
So screams the headline on BlackBerry Ltd.’s website just days before CEO John Chen hits his self-imposed September deadline to make the mobile company’s foundering hardware division profitable again or get out of the segment.
Investors and diehard BlackBerry fans alike will find out whether Chen managed to meet the goal he first voiced a year ago when the company releases its quarterly results Wednesday.
If he fails, it could spell the end of a storied device that once catapulted the Waterloo, Ont., company to the top of the TSX as the most valuable in Canada.
Yet Chen has remained stalwart in his belief there’s a market for BlackBerry devices among security-conscious customers, particularly governments, despite cries from some industry watchers that BlackBerry should hurry up and ditch money-losing hardware to focus on its growing, albeit smaller, software and services business.
The hardware division lost US$21 million in the quarter ended May 31 on sales of 500,000 phones, a far cry from peak quarterly sales of 13 million units in 2012.
Since then, BlackBerry launched the DTEK50, a mid-range Android-powered smartphone. Details about another higher-end BlackBerry were posted on the company’s website in an apparent leak for a brief period last week — it didn’t feature the QWERTY keyboard loved by so many — but the specifications were hastily removed.
Chen has said he needed to sell three million phones annually to break even in the hardware division.
Yet an accounting tweak to the division now called mobility solutions might help it get out of the red no matter how many smartphones were sold.
Last quarter, BlackBerry expanded the division to include revenue from device software licensing alongside smartphones.
If this initiative makes enough cash — it made nothing last quarter, but the company was in talks to license tech to a set-top box company — the division could be profitable, regardless of the success of the DTEK50 and older models.
That move is “essentially shifting goalposts,” said Partha Mohanram, CPA Ontario professor of financial accounting at the University of Toronto’s Rotman School of Management.
“That’s the way things work in this earnings management game. Guys are constantly changing the game,” he said.