BlackBerry pulls plug on smartphone manufacturing business after 14 years

BlackBerry has finally called time on its smartphone manufacturing business after announcing it will stop internal development of its own hardware. The Canadian company is shutting down manufacturing after 14 years amidst overwhelming competition from rivals, and will instead turn its full attention to software development, while partners take on the task of building phone hardware.

The announcement, made by BlackBerry CEO John Chen during the company's latest fiscal report, was widely considered an inevitability by those with an eye on the smartphone market. BlackBerry has struggled to maintain consumer interest since the rise of Apple's iPhone and high-end Android flagships, falling from its position as one of the top smartphone companies to one operating in obscurity.

The company recently made a last-ditch attempt to rekindle interest in the brand by launching devices running Google's Android operating system, most notably this year's high-end BlackBerry Priv. However, the handset failed to garner widespread interest, not least due to its initial £600+ asking price.

BlackBerry shutdown production of its classic qwerty-based handsets in July this year. Speaking at the time, Chen was ambitious that the company's smartphone unit could turn a profit by September.

Having acknowledged its efforts had failed, BlackBerry said it would refocus its strategy in order to save costs. "The company plans to end all internal hardware development and will outsource that function to partners," said Chen.

"This allows us to reduce capital requirements and enhance return on invested capital. We are reaching an inflection point with our strategy. Our financial foundation is strong, and our pivot to software is taking hold."

BlackBerry posted losses of $371m for the three months to August, compared to profits of $51 for the same period in 2015. In 2007, when BlackBerry was considered at the top of its game, the company made Q2 profits amounting to $288m.

Speaking to IBTimes UK, Ben Wood, chief of research at CCS Insight, said BlackBerry's move was "a rational decision."

"Like other phone makers it has lacked the necessary scale for some time to make its own smartphones financially viable. BlackBerry will be relieved to be able to focus 100% on its platforms and services business," he said.

"Enterprise mobility is a red-hot area and the company has a strong reputation in the space. The devices business became an unnecessary distraction that was detracting from John Chen's efforts to reinvent the company. BlackBerry devices no longer account for the lion's share of the company's revenue. Focus was needed and shifting the responsibility to a third party manufacturer makes perfect sense."

However, Wood questioned the feasibility of BlackBerry licensing handset production to other companies. "I'm sceptical a third party manufacturer will be able to make BlackBerry devices a viable business, even with scale from their own phone making activities. However, this route provides an elegant way for BlackBerry to pull back from the ever increasing burden of supporting a loss making phone manufacturing division".