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Blackberry outsources hardware after disappointing quarter

Wed 28 Sep 2016

With today’s release of lower than expected financial results for Q2 2017, Blackberry has announced that it will outsource the design of its signature mobile phones.

This decision was made by the company in order to refocus energy and resources on software and services, which performed well, with reported growth of 111% in non-GAAP revenue. Once a leader in mobile technologies, Blackberry has faced growing competition from companies such as Apple and Samsung.

Overall revenues for Blackberry Limited have fallen steadily for the last four quarters, from $548 million a year ago to $334 million today. Reported revenue was well below analyst forecasts of $391 million for Q2 revenues, although adjusted revenue was marked as break-even.

John Chen, Executive Chairman and CEO of Blackberry said that the company’s new Mobility Solutions strategy is growing in momentum, and that “(u)nder this strategy, we are focusing on software development, including security and applications. 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.”

By outsourcing hardware and refocusing the core business strategy, the company hopes to deliver 30% growth in revenues in software and services by the end of the fiscal year, and have revised their outlook for earnings per share to a five-cent loss by end of year, up from the original 15-cent loss forecasted previously.

The possibility of outsourcing hardware design was first broached by Mr. Chen in March of this year, when he said that he would give the hardware division until September to show a profit, hoping that outsourcing manufacturing to Foxconn Technologies and scaling back offerings would help the failing division. With the Q2 results released today and the announcement that hardware design would be outsourced to partners, Blackberry said that a new joint venture with Merah Putih would be responsible for the manufacture, distribution and promotion of Blackberry devices running Android software in Indonesia.

Blackberry also announced that Chief Financial Officer James Yersh would be stepping down for personal reasons, and that he would be replaced by Stephen Capelli, former President of Worldwide Field Operations at Sybase.

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