BlackBerry's transition to a software company is complete. During its Q2 2017 earnings today, CEO John Chen announced that the company "plans to end all internal hardware development and will outsource that function to partners." This change was already in the works for some time, with Foxconn taking over the design responsibilities of some of the company's future devices and TCL, owners of the Alcatel brand, building its phones under the DTEK brand, but to see it official is bittersweet for this Canadian.
"Our new Mobility Solutions strategy is showing signs of momentum," said Chen in a press release. "Under this strategy, we are focusing on software development, including security and applications."
BlackBerry's hardware business has been losing money for some time, and this is just the last nail in the coffin.
BlackBerry announced revenue of just $334 million for the quarter, down 47% from a year earlier, and down sharply from its days of billion-plus quarters less than three years ago. It lost $372 million due to a hit of $147 million from its RAP, or Resource Alignment Program, and $96 million from inventory write-downs.
In other words, BlackBerry's hardware business has been losing money for some time, and this is just the last nail in the coffin. But the company says that its transition to a software and services company, building Android-based security solutions for other OEMs, is proving successful, and revenue increases will meet the targets set in early 2016 for the end of this fiscal year. Chen is a pragmatist, and has been warning that he would get out of the hardware business should he see no future in it, and this move is the first step towards realizing that goal.
The investment needed in rebranding a TCL-built phone with BlackBerry software is minimal, especially, as we've seen in recent months, the company intends to distribute its security-focused Android software suite to all users running Lollipop and above. As someone who has followed BlackBerry since the early days of BlackBerry OS — I lined up to purchase a Bold 9000 in 2008 when everyone else was lusting after the iPhone 3G — I am a little saddened by this news, but certainly not surprised. Based on what we've seen from the burgeoning DTEK line, if there's any money to be made in the coming years, it's not going to be in high-margin devices like the Priv that, at $699, are critical successes and commercial failures.
The news comes on the heels of an announcement by Alcatel parent company TCL of its new TCL 950 flagship, the purported basis for BlackBerry's upcoming DTEK60, which is expected to be announced in mid-October.