BlackBerry to outsource handsets, will focus on software
toronto — BlackBerry Ltd will outsource the development and design of its smartphones, a product category it helped pioneer and popularise, as the Canadian company bets on software and managing rival devices, it said on Wednesday.
Shares of BlackBerry rose about six per cent in early trading, even as it reported a sharper-than-expected drop in quarterly revenue.
While some outsourcing of manufacturing had already occurred, the company will complete a full transition out of the hardware business by the end of the year, chief executive officer John Chen said on a call with analysts.
This is an entirely sensible decision and probably an overdue one
John Jackson, IDC technology analyst
It will instead take a royalty on devices sold by partners. The company signed a deal with Indonesia’s BB Merah Putih to manufacture, distribute and promote its branded devices in that country, its largest market for handsets. BlackBerry said it was also in late-stage discussions for a similar deal in China and working on several India initiatives.
“This is an entirely sensible decision and probably an overdue one,” said IDC technology analyst John Jackson. “Software revenue and the margin profile associated with that is where the focus should have been, and now can be.”
BlackBerry said software and services unit revenue was $156 million in its second quarter ended on August 31, compared with $105 million for the device business.
The company said 81 per cent of its software and services revenue in the quarter was recurring, an increase from the prior quarter.
Morningstar analyst Ali Mogharabi said on Wednesday’s news was reassuring even though some of the software and services revenue growth came from last year’s acquisition of Good Technology.
BlackBerry said its chief financial officer James Yersh would leave effective on October 1 for personal reasons, with former Sybase executive Steven Capelli replacing him.
The company reported a secondquarter net loss of $372 million, or 71 cents a share, compared with a year-earlier profit of $51 million, or 24 cents a share.
Excluding $147 million in charges from its reorganisation and other one-time costs, the company said it broke even. On that basis, analysts had on average expected a loss of five cents a share, according to Thomson Reuters I/B/E/S.
Revenue fell to $334 million from $490 million, missing analysts’ estimates of $393.75 million.
The company raised its full-year earnings outlook to a range of breakeven to a loss of five cents a share, excluding special items, after refinancing its debt and as margins improved. It previously expected a 15-cent loss. — Reuters