Well, that was strange. Two days after the Federal Communications Commission in the United States approved BlackBerry’s application for what will become the DTEK 60, the slightly upgraded sequel to the DTEK 50, CEO John Chen announced that the company was getting out of the phone business.
On the quarterly earnings call this morning, Chen announced that BlackBerry will end internal hardware development, and will outsource hardware development to partners.
That particular point is a bit of a headscratcher because it seemed like common knowledge among BlackBerry watchers that the DTEK 50 was already an outsourced phone, not manufactured by BlackBerry at all but by Alcatel, with an Android operating system, meaning that the old BlackBerry operating system had basically seen the inside of its last phone with the Passport.
The Priv had been the first BlackBerry device using Android, which for many users who had come to enjoy the BlackBerry operating system was both a turning point and a disappointment.
On the actual earnings track, BlackBerry Limited (NASDAQ:BBRY)(TSX:BB) looks to be consolidating the core of its business, which means finally surrendering on the handset front.
The company beat analyst estimates in Q2, reporting per-share earnings of $0.00, or five cents better than the minus-$0.05 that analysts had predicted, on quarterly non-GAAP revenue of US$352 million.
Total net loss was US$372 million, or 71 cents per share, on revenue of $334 million, a 31.8% plunge from the same time a year earlier.
Even if revenue had been up from a year ago, it’s still unclear whether Chen would have mothballed the handset division, given all the signalling he’s done over the past year indicating that it was probably toast anyway, and that it would be better to concentrate on BlackBerry’s strengths.
“We are reaching an inflection point with our strategy. Our financial foundation is strong, and our pivot to software is taking hold,” said Chen. “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 BBM consumer business.”
Still, the success of BlackBerry Radar, and other successes in the IoT and enterprise software units, wasn’t enough to subsidize the money losing proposition of making phones.
In that sense, BlackBerry is finally making the transition to becoming an IBM-type company, which long ago stopped producing physical company-branded computers in favour of transforming itself into a huge enterprise-focused technology company, serving the backbone of the infrastructure rather than the customer-facing part of the business.
For most BlackBerry enthusiasts, the decision to outsource both phone hardware and design basically means the death of phones sporting a physical QWERTY keyboard, the iconic BlackBerry trait that so many customers had fallen in love with early in the 21st century, a time when owning a BlackBerry was a symbol for being a serious grown-up person working on Bay Street or Wall Street or for the government or a decent sized company.
Post-2007, BlackBerry ownership has descended from being a point of pride to a weird punchline, with the giggling fratboy face of Jimmy Fallon ribbing President Obama on his talkshow about the trouble he’s having trying to transition from BlackBerry to whatever type of phone he’ll use when he’s out of office.
Depending on your context, you still see plenty of BlackBerrys around, although mainly at functions attended by Bay Street lifers, who flash their Passports and their Privs like the badges of honour they once were. Outside of that context, not so much.
The question for consumers is, now that Chen has tipped his hand on handsets, what does that mean for the DTEK 60, which received FCC approval two days ago?
Who in their right mind is going to buy this phone, now that Chen has indicated that the company is finished with phone-making?
Even if the DTEK 60 is good, even if it gets good reviews and decent feedback from BlackBerry loyalists, the device is doomed by the indication from the company itself that if you buy this phone, you’re on your own.
At the Empire Club in Toronto on Monday, in conversation with BNN’s Amber Kanwar, Chen kept all avenues open, suggesting that he would only get rid of BlackBerry’s identity as a phone maker if the fat lady definitively sang.
But while he was sitting there, he would already have known that the FCC had approved the DTEK 60. And he would also have known what was in Wednesday’s second-quarter earnings report, in which the fat lady’s voice rang out loud and clear.
Fans of BlackBerry have resigned themselves, ever since the introduction of the Priv, that we were never going to see another in-house phone designed and built by BlackBerry.
But at least we held out hope that these next phones, the DTEK 50 and DTEK 60, would receive a modicum of support from the company.
The DTEK 60 is supposedly a premium device, an upgrade on the DTEK 50. If it even gets released at all now, the only type of audience who might possibly actually buy it is the type of person who grabs a souvenir ashtray from a Las Vegas casino the day before it’s demolished.
At least you can still use the ashtray.
For my part, they (whoever they are) will have to pry my Z30 from my cold, dead hands, when it eventually stops working. It’s by a long shot the best phone I’ve ever owned, including a bizarrely overrated iPhone and a Samsung Android that feels more like a child’s toy phone than an adult device.
The build quality on the Z30 is pretty good, though. The phone itself will likely outlast the final operating system update, when it eventually arrives, by several years.