Marking the end of an era, Blackberry Ltd. of Canada confirmed Wednesday that it will “end all internal hardware development” effective immediately and will instead license its brand and software to a pair of Indonesian firms that will develop handsets bearing the Blackberry name. During a conference call, Blackberry CEO John Chen told analysts that the decision corresponds with his company’s strategic shift in focus from the production of handsets to the development of wireless device security and other software. Prior to the debut of the iPhone in 2007, Blackberry dominated the wireless handset sector with its innovative line of mobile e-mail devices sporting “Qwerty” keyboards. The devices soared to such levels of popularity that they became known as “Crackberries.” At the height of its success in 2008, Blackberry recorded a market value of more than $80 billion. Since then, Apple, Samsung and other manufacturers of touch screen smart phones have eaten into Blackberry’s market share, eroding the company’s valuation to just $4 billion today.
As he noted that handset sales accounted for 30% of Blackberry’s revenues during the second quarter, Chen said, “we are reaching an inflection point with our strategy.” Under the new strategy, Blackberry will take a royalty on devices that are produced and sold under the Blackberry license. Already, Blackberry has signed distribution and licensing deals with BB Merah Putih and PT Tiphone Mobile of Indonesia. Chen also affirmed that his company is pursuing similar deals with manufacturers in China and India. Observing that “software revenue and the margin profile associated with that is where the focus should have been,” one analyst termed Blackberry’s move as “entirely sensible.”