BlackBerry gets juicy with its software focus

WHEN Morgan Stanley this week removed its “sell” rating on BlackBerry shares, upgrading it to the equivalent of “hold”, it was not exactly a signal to pile in. But it did highlight the fact that the company was no longer regarded as a basket case.

Clearly, analysts have started paying attention to the vigorous efforts the former smartphone leader is making to shore up its software and security offerings.

Last week, at the BlackBerry Security Summit in New York, John Chen, CEO and executive chairman, presented numbers that were even more convincing than any analyst rating.

Aside from a continued return to profitability — in the last quarter net income rose to $68-million (about R866-million) from $23-million a year before — it also had $3.32-billion in the bank, up $50-million on the previous quarter.

The most impressive number, however, was the $100-million invested in the past year to shore up its security platform.

BlackBerry has acquired several start-ups, including Israeli-US file-sharing security company WatchDox.

Its 100-strong Israel office will become BlackBerry’s security research and development centre — in what has become known as Silicon Wadi.

Chen also revealed last week that BlackBerry would cut its annual handset releases to one or two devices a year. This means handset sales, which have been falling for years, and stood at only 1.1 million last quarter, will no longer define the business. Ironically, with a leaner and meaner operation, revenue generated per handset is on the rise.

What will replace them? The answer was to be seen in the previous quarterly results, which showed software sales doubling, from $67-million to $137-million. The main contributor is BlackBerry Enterprise Service, a mobile device management system that is one of the best solutions for controlling the corporate chaos of the bring-your-own-device trend.

At the summit, handsets were all but ignored. Instead, the event highlighted the blanket nature of BlackBerry’s security solutions. It covers not only mobile devices, but also the Internet of Things — the world of connected devices (from car sensors to fridges) that are often the weakest link in companies’ network security.

In an interview with Business Times, BlackBerry chief operating officer Marty Beard said that, although the Internet of Things was not yet having a big impact in developing countries, the need for mobile security was possibly even greater.

“In developing markets, mobile phones are the most prominent communications medium. But remote diagnostics also makes sense . . . when you consider the need to keep track of equipment in remote areas. In the future, the Internet of Things will take off in manufacturing, especially in Asia . . . It revolves around having all this capital equipment which you need to maintain and know what’s happening at all times through remote diagnostics.”

Beard said BlackBerry would always be focused on South Africa as a “priority market”. Its opportunity will be based on the strong relationships with the network operators — built up through the handset business.

“The carriers are also in software, and trying to find new pockets of revenue themselves. All network carriers have enterprise sales forces, and we see the carrier ecosystem as our biggest opportunity to expand in South Africa.”

Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter on @art2gee