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BlackBerry ends production of mobile phones

Canadian firm to focus on a strategy built around software development, including security and applications, and mobile device management

BlackBerry is to cease making smartphone devices and will outsource the production of future handsets to technology partners.

John Chen, BlackBerry executive chairman and CEO, announced the decision to wind down the firm’s manufacturing business alongside its second-quarter results.

“The company plans to end all internal hardware development and will outsource that function to partners,” said Chen. “This allows us to reduce capital requirements and enhance return on invested capital.”

He said the Canadian firm would now focus on a strategy built around software development, including security and applications, and mobile device management (MDM).

Chen said BlackBerry had more than doubled its year-on-year software revenues during the three months to the end of August 2016.

“We also completed initial shipments of BlackBerry Radar, an end-to-end asset tracking system, and signed a strategic licensing agreement to drive global growth in our BBM [BlackBerry Messenger] consumer business,” he said.

BlackBerry has already signed a deal with an Indonesian manufacturer – BB Merah Putih, according to Reuters ­– to handle the manufacture of its devices in that market. The news agency reported that BlackBerry was conducting negotiations to set up similar arrangements in China and India.

At the height of its celebrity in the mid-2000s, BlackBerry devices were seen as highly desirable and received endorsements from businessmen and women, and the rich and famous.

But the introduction of Apple’s first iPhone in 2007 challenged its entire business model with the introduction of the touchscreen form factor and downloadable third-party applications.

Lost too much ground

Despite several attempts to compete with the iPhone, by the time it introduced its own smartphone operating system in 2013, BlackBerry had lost too much ground both to Apple and manufacturers developing devices on the Android platform. Ultimately, BlackBerry itself switched to Android.

Ben Wood, chief of research at networking and mobile analysis firm CCS Insight, said Chen had made valiant efforts to keep BlackBerry’s head above the water, but ultimately the commercial realities made the decision to axe device manufacturing inevitable.

“BlackBerry has succumbed to the pressure so many other phonemakers have faced,” he said. “It lacks the scale to be competitive in devices and can’t keep producing its own phones indefinitely just to serve a small subset of its clients addicted to its home-grown devices.

“Having a third party take over manufacturing is sensible, but how how long that lasts has to be a question mark.”

BlackBerry reported sales of $334m, down 31% year-on-year, during its second quarter, alongside a net loss of $372m, compared to profit of $51m a year ago.

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