BlackBerry Escapes Death, Sets Its Sights On A Security And IoT Software Comeback

John Chen CEO BlackBerry Source: BlackBerry

John Chen CEO BlackBerry Source: BlackBerry

Smartphones and BlackBerry were nearly synonyms at one point. Today, Apple and Samsung rule the roost in smartphones.

John Chen CEO BlackBerry Source: BlackBerry

John Chen CEO BlackBerry Source: BlackBerry

Smartphones and BlackBerry were nearly synonyms at one point. Today, Apple and Samsung rule the roost in smartphones. In 2014, I wrote a Forbes article that posed the question “Can Blackberry be the comeback kid?” I noted that smartphone sales wouldn’t be the linchpin for BlackBerry’s market turnaround and that the company should focus on migrating to a security software and services provider. At the time, it was losing the devices war, but the security challenge was wide open.

Fast forward two years and BlackBerry’s still kicking. Yet, the wounds from the smartphone battle have taken their toll on BlackBerry with its revenue shrinking from $18 billion in 2012 to $2.8 billion with a net loss for the fiscal year 2016. Clearly, BlackBerry has been challenged over the past two years but did anything go well in the last twelve months? The short answer is yes. The company made at least three announcements in December that BlackBerry clients and market watchers had been waiting for.

1. It’s outsourcing phone manufacturing and sales.

In October 2016, BlackBerry launched a new smartphone, the DTEK50, manufactured by TCL Communications. As it turns out, this was a dry run to test the value is signing a long-term licensing agreement deal with TCL Communications. By December, BlackBerry inked a deal to license its security software and service suite, as well as related brand assets to TCL Communication. TCL will design, manufacture, sell and provide customer support for BlackBerry-branded mobile devices. Outsourcing manufacturing was a significant milestone for the company. Without this move, BlackBerry couldn’t migrate to a software company. It’s design and marketing efforts would also have suffered.

2. It has integrated several of its acquisitions into a suite.

Over the past two years, the company purchased vendors in the enterprise mobile management (EMM), crisis communications, secure document management and cybersecurity services markets. These include:

• The AtHoc suite that unifies crisis communications within and between organizations, their people, devices, and external entities. Crisis message management is a good fit for serving governments and public safety.

• Encription offers bolstered its cyber security services portfolio with offerings such as Penetration Testing (Pen Testing) for websites and networks, digital forensics and cyber training.

• Good Technology was the main competitor to BlackBerry’s BES in the major regulated industries such as financial services. It offered an EMM suite that came with apps such as secure mail, documents. Good was a solid acquisition to grow the customer base and minimize regulated market competition. But it came at the expense of running two platforms until it could integrate the solutions.

• WatchDox rounded out content security management with secure enterprise file sync and share solutions.

While it’s nice to have a broad range of solutions, it’s difficult for customers to deploy such a diverse product offering. In December, the company announced enhancements, integrations and rebranding of multiple products into a suite that it calls BlackBerry Secure. The suite also includes two-factor authentication, identity management with Single Sign-on (SSO) into a variety of third-party cloud services and an SDK that allows application developers to easily integrate with any BlackBerry service.

These changes took considerable time and engineering resources to execute, but it was necessary to derive any long-term value from the acquisitions. Now the company’s challenge is to convince new prospects to evaluate the suite.

3. It demonstrated progress in growing software and services.

The company was highly dependent on Systems Access Fees (SAF) and device sales revenue in previous years. As these income sources decline, BlackBerry needs to rapidly add new revenue sources. In December, BlackBerry announced that its software and services operations generated $160 million in sales in its fiscal third quarter, up about 16 percent from the preceding quarter. The company expects the software business to grow 30 percent in the current fiscal year. Its gross margin for the last quarter also reached 66.8 percent. These figures suggest growth in new software and services revenue even in the face of dramatic declines in SAF and device sales.

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