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Sep 28 2016
Mobility

BlackBerry To Stop Developing Phone Hardware Internally

The smartphone pioneer said it will continue to focus on software development, including security and applications.
Phil Goldstein
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Phil Goldstein is a former web editor of the CDW family of tech magazines and a veteran technology journalist. He lives in Washington, D.C., with his wife and their animals: a dog named Brenna, and two cats, Grady and Princess.

BlackBerry said on Wednesday it will halt internal development of new smartphones, and instead focus on applications, services and security. The decision comes after years of dwindling hardware sales and as the company has shifted from a phone maker to a provider of software and security solutions.

"We are reaching an inflection point with our strategy. Our financial foundation is strong, and our pivot to software is taking hold," BlackBerry CEO John Chen said in a statement accompanying the company’s fiscal second quarter earnings report. "Our financial foundation is strong, and our pivot to software is taking hold. In Q2, we more than doubled our software revenue year over year and delivered the highest gross margin in the company’s history. 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 [BlackBerry Messenger] consumer business."

“Under this strategy, we are focusing on software development, including security and applications,” Chen added. “The company plans to end all internal hardware development and will outsource that function to partners. This allows us to reduce capital requirements and enhance return on invested capital.”

Chen has said repeatedly BlackBerry would exit the phone hardware business if it could no longer make a profit doing so. As far back as 2013, BlackBerry partnered with contract manufacturer Foxconn to outsource the development and production of some of its entry-level phones.

BlackBerry recently introduced smartphones running a modified version of Google’s Android software, including the security-focused Priv and the DTEK50, a phone that was basically an Alcatel OneTouch phone with BlackBerry branding. Those phones have not helped halt BlackBerry’s declining phone sales. According to research firm Gartner, BlackBerry only made up 0.1 percent of the worldwide smartphone market in the second quarter of 2016.

Yet BlackBerry devices are still widely used within federal agencies, which demand high levels of security for mobile devices that BlackBerry provides. Additionally, BlackBerry phones are still widely used in the healthcare, financial services and legal fields, as well as other regulated industries. 

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