BlackBerry Abandons Making Own Hardware As Revenues Decline

In line with expectations outlined by several analysts, BlackBerry’s CEO John Chen has decided to pull the plug on the company’s hardware business. The move was anticipated after Chen’s takeover, as he sought to turn the company around and into profit by expanding its portfolio of higher-margin mobile software and services to business and government clients (via the Wall Street Journal).

“We’ve decided to discontinue our handset hardware development and leverage third-party partners,” Mr. Chen said in a conference call. “We believe that this is the best way to drive profitability in the device business.”

BlackBerry will end all of its internal hardware development and outsource that work to various partners such as PT Telekomunikasi Indonesia Tbk, the largest mobile operator in Indonesia, which will license BlackBerry software and services, and manufacture Android-powered devices for the market it serves.

The Canadian (ex-)manufacturer will receive a fixed royalty for each new smartphone sold by its partner and, according to Chen, is in talks with other third parties to develop additional devices.

Chen said that he would decide in September on the fate of the iconic BlackBerry smartphone. Once a market leader, now BlackBerry’s global smartphone market share is below 1%, as it failed to launch a handset that was able to compete with Apple’s iPhone or Samsung’s handsets.

BlackBerry did launch new smartphones, but hardware sales continued to fall: In the first quarter of the current fiscal year, the company sold half a million handsets, down from 600,000 in the previous quarter, and 700,000 in the third fiscal quarter. In the latest quarter, sales dropped to 400,000, giving Chen the final impetus to end the hardware side of the business.