BlackBerry's Chen: The focus is more on profitability than new smartphones

BlackBerry (NASDAQ:BBRY) CEO John Chen said the company is going to be more focused on becoming profitable and maintaining that status than churning out a wide range of new smartphones.

As the company enters the next phase of its turnaround under Chen, the BlackBerry chief has made profitability the key focus. Though Chen has promoted a forthcoming device with a physical keyboard the company will soon debut called the Classic, rolling out smartphones for the sake of doing so will not be the company's strategy.

"Once we turn this company to profitability again, I will do everything I can to never lose money ever again," Chen told Reuters, a little more than a year after he arrived at BlackBerry. "That is definitely something I am very focused on doing."

Since taking over, Chen has cut costs, forged a five-year manufacturing deal with Foxconn for the contract manufacturer to jointly develop and manufacture some of BlackBerry's new lower-end devices, started hiring again and even made some small technology acquisitions. 

Chen previously took command of struggling database firm Sybase, turning it around and selling it to SAP in 2010 for $5.8 billion. "If you look at my track record at Sybase, I think we made money for some 60 quarters in a row, even when the dotcom bubble blew up we were profitable. I like that philosophy," Chen said, arguing that BlackBerry has passed through the toughest part of its turnaround.

"We will survive as a company and now I am rather confident," he said. "We're managing the supply chain, we are managing inventories, we are managing cash, and we have expenses now at a number that is very manageable. BlackBerry has survived; now we have to start looking at growth."

BlackBerry reported a profit, on an adjusted basis, from its handset business for the first time in five quarters in September. However, the company captured just 0.7 percent of the global smartphone market in the third quarter, according to research firm Strategy Analytics.

BlackBerry is "reasonably comfortable" it can keep making money from its handset business, given operating margins, Chen said, adding that orders for its square-shaped Passport device have increased.

"I'm happy in the receptivity of the design. I'm happy that this product is a successful product, but we did not make that many of them, so it is in limited supply almost everywhere," he said.

Chen said the company has not made any final decisions about its 2015 device roadmap but will focus on a handful of devices it thinks can make a splash in the market, including one new unconventionally designed phone, as well refreshes of the Passport, Classic and its mid-range Z3 touchscreen phone.

"I'm not going to build a general purpose device, simply because it is a 5-inch touchscreen," he said. "The Chinese can build one for 75 bucks, I can't get enough parts together for 75 bucks."

Chen admits that BlackBerry's turnaround has not fully succeeded yet. In its most recent quarter the company posted a net loss of $207 million during the period, notably smaller than the $965 million net loss it recorded during the same period a year ago. And while some analysts have praised Chen for changing the direction of the company to focus more on its enterprise and services business, others say the firm is not in the clear yet.

"Overall we think John is doing a solid job, but our concern continues to be: how will BlackBerry drive demand for its product,"  Morningstar analyst Brian Colello told Reuters. "The demand side of the equation is still a concern, both around selling millions of devices each year and converting enterprise software users into paying buyers in a very competitive market."

For more:
- see this Reuters article
- see this FT article (sub. req.)

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