Chen gives BLACKBERRY handsets PROFIT ultimatum
‘I personally do NOT believe DEVICES is going to be the FUTURE of ANY company’ ‘We’ve got to get there this year,’ CEO says
BlackBerry Ltd. isn’t ditching handsets just yet, with its top objective for 2017 to return its struggling device business to profitability, CEO John Chen told shareholders Wednesday.
“The device business must be profitable, we don’t want to run a business that drags on the bottom line,” Chen said at the company’s annual general meeting in Waterloo, Ont., held the day before the company releases its fiscal 2017 first quarter results.
“It’s time for us to get to the profitability… we’ve got to get there this year.”
His comments set the stage for BlackBerry’s earnings report, which analysts predict will mark continued losses for the once dominant handset maker. Sixteen analysts surveyed by Thomson Reuters estimated on average that BlackBerry, which reports in U. S. currency, will likely report a loss of US$ 27 million after adjustments, or about US7 cents per share.
That said, Chen said he doesn’t see handsets, which have transformed i nto a commodity since BlackBerry’s reign a decade ago, as the future of the company that has pivoted towards software and security services.
“I personally do not believe devices is going to be the future of any company,” he said, instead pointing towards what runs on the devices and keeps them connected as the way forward for BlackBerry. Of the estimated three billion mobile phones in use around the world, company documents state there were about 23 million BlackBerry users as of March 2016.
Still, BlackBerry’s most recent offering — the Priv runs on an Android system — isn’t doing as well as the company hoped, Chen said.
“Our one device is unfortunately too high end and is not moving as fast as we’d like,” he said.
It’s had success working with the Big Three Canadian wireless carriers, he said, but he still hears reports of younger employees at the retail level ignoring BlackBerry to push iPhones and Samsung due to better incentives.
“Our phones are not in high demand and they want to move volume. It is a mismatch of priorities in some way,” he said.
The company’s goal is to grow its software business fast enough to make up for the loss of service activation fees, a paradigm that is no longer supported, Chen added. It’s aiming for 30-per-cent growth in the software category this year, he said.
While Chen may prefer to focus on Blackberry’s new endeavours, including enterprise software that runs on all devices and cyber-security consulting, the questions at the AGM from loyal investors zeroed in on marketing the company’s devices.
Chen’s responses were at times contradictory. He stated the biggest marketing challenge was affordability before saying the company is vying for a business audience. The company advertised during presidential debates to capture that audience, he said, yet it’s also advertising more on buses. It experimented with ads during Raptors games, but he has no intention of doing something “flashy” like paying a celebrity to parade around with a Blackberry.
“I can’t tell you that we’re a great marketing company, but we’re trying to rebuild our brand,” he said.
While the company has returned to positive cash flow, it is not considering dividends.
“I think we are stabilized, but we’re not out of the woods,” Chen said.
During the meeting’s formal proceedings, all eight board members were officially elected and Ernst and Young was reappointed as the auditor.
WE ARE STABILIZED, BUT WE’RE NOT OUT OF THE WOODS.