Chen sets deadline for BlackBerry phone profitability

News Apr 01, 2016 by Terry Pender Waterloo Region Record

WATERLOO — BlackBerry will stop making smartphones if the devices are not profitable, or at least breaking even, by September, John Chen, the company's chief executive officer, said Friday.

"From an investor point of view, it is a senseless thing to think you are going to forever stick with something that loses money," Chen said in an roundtable interview with reporters at the company's Waterloo headquarters after the release of its fourth-quarter financial results.

It was Chen's strongest statement to date about the future of BlackBerry's smartphone business.

The company sold 600,000 smartphones in the three-month period ending Feb. 29, a total that Chen called disappointing. It was 100,000 lower than the total for the previous quarter.

On the plus side, in the fiscal year ending in February, BlackBerry surpassed its software revenue target of US$500 million. Chen first announced that target in November 2014.

"Nobody believed us, but we did," Chen said of that objective.

He predicted that same thing will happen with smartphones.

"I am quite close to breaking even," Chen said of the smartphone business. "My No. 1 focus is to stay in the hardware business beyond September."

Remaining in the hardware business is important because profits from smartphones will give BlackBerry time to develop innovations that capture the imagination of business and consumer users, Chen said. New materials and forms are needed to energize a tired market that offers little more than different screen sizes, he said.

"I actually don't intend to get out of that business. I don't think we need to," he said. "I will let the math and the market tell me that."

BlackBerry, which recorded a net loss of US238 million in the fourth quarter, pioneered the smartphone only to see its share quickly dwindle to less than one per cent of the world market.

While it has more than doubled the revenue from software and services in the past 18 months, the sale of handsets has continued to drop.

Chen said the company has to do better job selling its smartphones and may have to start marketing directly to enterprise customers. Businesses, governments and executives who bought the Priv, the company's first Android phone with a slider keyboard, loved it, he said.

"What I need to do is get more people to learn about this product, educated about this product and use it," Chen said. "I really believe I have not done a good enough job in reaching out to that audience more directly, and that's what I am trying to do."

The Priv is now available in 34 countries, he said — up from four since the previous quarter. The company did not break out sales for the Priv, but Chen said the company needs to sell about three million for an average price of about $300 to break even on the product, he said.

Chen said BlackBerry plans to launch a new device in the coming months that will cost $300 to $400. The high-end market for smartphones is saturated, he said.

"I am trying to put it out before September," Chen said. "It is going to be more of a Z30-type replacement. It is going to be Android-based, and it is going to have the same operating system Priv has."

If the company stops making smartphones, there would not be many, if any, layoffs, Chen said. "The majority of our engineering people on the handset side are actually software people," he said.

Hardware employees who would be impacted by the exit from smartphones would be needed to work on devices for the Internet of Things, he said.

"A lot of the hardware technology and the patents we own are actually needed for the Internet of Things," Chen said. "You can't say: 'Well you don't do the phones and you get rid of everybody.' That doesn't compute."

BlackBerry currently employs 5,000 people worldwide. About 70 per cent are in Canada, divided between Waterloo and Ottawa. While the company's payroll has shrunk in recent years, it has also hired.

Last year, it hired 850 people. About 70 per cent of those hires happened in Canada. Currently, there are 600 job openings now, mostly in sales.

For fiscal 2017, Chen is predicting a 30-per-cent increase in revenue from software sales. That increase will come from new customers and not from acquisitions, he said.

"We are definitely doing well in software," he said.

BlackBerry reported a US$238 million net loss in its fourth quarter, with much of the red ink attributed to costs related to restructuring and acquisitions. After adjustments that exclude the restructuring and acquisition costs, the loss was three cents per share — less than analyst estimates of 10 cents per share.

Revenue was US$464 million, including a writedown of deferred revenue associated with recent acquisitions. Without that, it would have been US$487 million.

The revenue was below analyst estimates of US$563 million, according to Thomson Reuters.

BlackBerry shares fell nearly eight per cent to settle at $9.74 on the Toronto Stock Exchange on Friday. On the Nasdaq, they closed at US$7.48, a decline of more than seven per cent.

tpender@therecord.com with files from The Canadian Press

Chen sets deadline for BlackBerry phone profitability

News Apr 01, 2016 by Terry Pender Waterloo Region Record

WATERLOO — BlackBerry will stop making smartphones if the devices are not profitable, or at least breaking even, by September, John Chen, the company's chief executive officer, said Friday.

"From an investor point of view, it is a senseless thing to think you are going to forever stick with something that loses money," Chen said in an roundtable interview with reporters at the company's Waterloo headquarters after the release of its fourth-quarter financial results.

It was Chen's strongest statement to date about the future of BlackBerry's smartphone business.

The company sold 600,000 smartphones in the three-month period ending Feb. 29, a total that Chen called disappointing. It was 100,000 lower than the total for the previous quarter.

On the plus side, in the fiscal year ending in February, BlackBerry surpassed its software revenue target of US$500 million. Chen first announced that target in November 2014.

"Nobody believed us, but we did," Chen said of that objective.

He predicted that same thing will happen with smartphones.

"I am quite close to breaking even," Chen said of the smartphone business. "My No. 1 focus is to stay in the hardware business beyond September."

Remaining in the hardware business is important because profits from smartphones will give BlackBerry time to develop innovations that capture the imagination of business and consumer users, Chen said. New materials and forms are needed to energize a tired market that offers little more than different screen sizes, he said.

"I actually don't intend to get out of that business. I don't think we need to," he said. "I will let the math and the market tell me that."

BlackBerry, which recorded a net loss of US238 million in the fourth quarter, pioneered the smartphone only to see its share quickly dwindle to less than one per cent of the world market.

While it has more than doubled the revenue from software and services in the past 18 months, the sale of handsets has continued to drop.

Chen said the company has to do better job selling its smartphones and may have to start marketing directly to enterprise customers. Businesses, governments and executives who bought the Priv, the company's first Android phone with a slider keyboard, loved it, he said.

"What I need to do is get more people to learn about this product, educated about this product and use it," Chen said. "I really believe I have not done a good enough job in reaching out to that audience more directly, and that's what I am trying to do."

The Priv is now available in 34 countries, he said — up from four since the previous quarter. The company did not break out sales for the Priv, but Chen said the company needs to sell about three million for an average price of about $300 to break even on the product, he said.

Chen said BlackBerry plans to launch a new device in the coming months that will cost $300 to $400. The high-end market for smartphones is saturated, he said.

"I am trying to put it out before September," Chen said. "It is going to be more of a Z30-type replacement. It is going to be Android-based, and it is going to have the same operating system Priv has."

If the company stops making smartphones, there would not be many, if any, layoffs, Chen said. "The majority of our engineering people on the handset side are actually software people," he said.

Hardware employees who would be impacted by the exit from smartphones would be needed to work on devices for the Internet of Things, he said.

"A lot of the hardware technology and the patents we own are actually needed for the Internet of Things," Chen said. "You can't say: 'Well you don't do the phones and you get rid of everybody.' That doesn't compute."

BlackBerry currently employs 5,000 people worldwide. About 70 per cent are in Canada, divided between Waterloo and Ottawa. While the company's payroll has shrunk in recent years, it has also hired.

Last year, it hired 850 people. About 70 per cent of those hires happened in Canada. Currently, there are 600 job openings now, mostly in sales.

For fiscal 2017, Chen is predicting a 30-per-cent increase in revenue from software sales. That increase will come from new customers and not from acquisitions, he said.

"We are definitely doing well in software," he said.

BlackBerry reported a US$238 million net loss in its fourth quarter, with much of the red ink attributed to costs related to restructuring and acquisitions. After adjustments that exclude the restructuring and acquisition costs, the loss was three cents per share — less than analyst estimates of 10 cents per share.

Revenue was US$464 million, including a writedown of deferred revenue associated with recent acquisitions. Without that, it would have been US$487 million.

The revenue was below analyst estimates of US$563 million, according to Thomson Reuters.

BlackBerry shares fell nearly eight per cent to settle at $9.74 on the Toronto Stock Exchange on Friday. On the Nasdaq, they closed at US$7.48, a decline of more than seven per cent.

tpender@therecord.com with files from The Canadian Press

Chen sets deadline for BlackBerry phone profitability

News Apr 01, 2016 by Terry Pender Waterloo Region Record

WATERLOO — BlackBerry will stop making smartphones if the devices are not profitable, or at least breaking even, by September, John Chen, the company's chief executive officer, said Friday.

"From an investor point of view, it is a senseless thing to think you are going to forever stick with something that loses money," Chen said in an roundtable interview with reporters at the company's Waterloo headquarters after the release of its fourth-quarter financial results.

It was Chen's strongest statement to date about the future of BlackBerry's smartphone business.

The company sold 600,000 smartphones in the three-month period ending Feb. 29, a total that Chen called disappointing. It was 100,000 lower than the total for the previous quarter.

On the plus side, in the fiscal year ending in February, BlackBerry surpassed its software revenue target of US$500 million. Chen first announced that target in November 2014.

"Nobody believed us, but we did," Chen said of that objective.

He predicted that same thing will happen with smartphones.

"I am quite close to breaking even," Chen said of the smartphone business. "My No. 1 focus is to stay in the hardware business beyond September."

Remaining in the hardware business is important because profits from smartphones will give BlackBerry time to develop innovations that capture the imagination of business and consumer users, Chen said. New materials and forms are needed to energize a tired market that offers little more than different screen sizes, he said.

"I actually don't intend to get out of that business. I don't think we need to," he said. "I will let the math and the market tell me that."

BlackBerry, which recorded a net loss of US238 million in the fourth quarter, pioneered the smartphone only to see its share quickly dwindle to less than one per cent of the world market.

While it has more than doubled the revenue from software and services in the past 18 months, the sale of handsets has continued to drop.

Chen said the company has to do better job selling its smartphones and may have to start marketing directly to enterprise customers. Businesses, governments and executives who bought the Priv, the company's first Android phone with a slider keyboard, loved it, he said.

"What I need to do is get more people to learn about this product, educated about this product and use it," Chen said. "I really believe I have not done a good enough job in reaching out to that audience more directly, and that's what I am trying to do."

The Priv is now available in 34 countries, he said — up from four since the previous quarter. The company did not break out sales for the Priv, but Chen said the company needs to sell about three million for an average price of about $300 to break even on the product, he said.

Chen said BlackBerry plans to launch a new device in the coming months that will cost $300 to $400. The high-end market for smartphones is saturated, he said.

"I am trying to put it out before September," Chen said. "It is going to be more of a Z30-type replacement. It is going to be Android-based, and it is going to have the same operating system Priv has."

If the company stops making smartphones, there would not be many, if any, layoffs, Chen said. "The majority of our engineering people on the handset side are actually software people," he said.

Hardware employees who would be impacted by the exit from smartphones would be needed to work on devices for the Internet of Things, he said.

"A lot of the hardware technology and the patents we own are actually needed for the Internet of Things," Chen said. "You can't say: 'Well you don't do the phones and you get rid of everybody.' That doesn't compute."

BlackBerry currently employs 5,000 people worldwide. About 70 per cent are in Canada, divided between Waterloo and Ottawa. While the company's payroll has shrunk in recent years, it has also hired.

Last year, it hired 850 people. About 70 per cent of those hires happened in Canada. Currently, there are 600 job openings now, mostly in sales.

For fiscal 2017, Chen is predicting a 30-per-cent increase in revenue from software sales. That increase will come from new customers and not from acquisitions, he said.

"We are definitely doing well in software," he said.

BlackBerry reported a US$238 million net loss in its fourth quarter, with much of the red ink attributed to costs related to restructuring and acquisitions. After adjustments that exclude the restructuring and acquisition costs, the loss was three cents per share — less than analyst estimates of 10 cents per share.

Revenue was US$464 million, including a writedown of deferred revenue associated with recent acquisitions. Without that, it would have been US$487 million.

The revenue was below analyst estimates of US$563 million, according to Thomson Reuters.

BlackBerry shares fell nearly eight per cent to settle at $9.74 on the Toronto Stock Exchange on Friday. On the Nasdaq, they closed at US$7.48, a decline of more than seven per cent.

tpender@therecord.com with files from The Canadian Press