BlackBerry to exit manufacturing business, will outsource to partners

Source: Flickr user Enrique Dans

BlackBerry said it will exit the smartphone manufacturing business after the company posted a net quarterly loss of $372 million.

The onetime king of phones for the mobile enterprise said it will hone its focus on software development and licensing but will no longer build handsets in-house.

“Our new Mobility Solutions strategy is showing signs of momentum, including our first major device software licensing agreement with a telecom joint venture in Indonesia,” CEO John Chen said in a press release. “Under this strategy, we are focusing on software development, including security and applications. The company plans to end all internal hardware development and will outsource that function to partners.”

The move, which had long been rumored, will allow the company to reduce its capital spending and “enhance return on invested capital,” Chen said.

BlackBerry posted revenue of $334 million during the quarter ending August 31, down significantly from $490 million during the year-ago period and short of analysts’ estimates of $393.75 million, Reuters reported. It broke even, however, excluding $147 million in charges from restructuring, and it raised its outlook for full-year earnings.

“We remain on track to deliver 30 percent revenue growth in software and services for the full fiscal year,” Chen said. “We are revising upward our… outlook to a range of breakeven to a five cent loss (excluding special items), compared to the current consensus of a 15 cent loss. This reflects increased confidence based on improving margins and reduced interest expense from the recent financing of our debt, as well as planned investments in growth areas.”

Killing its manufacturing business marks the end of an era for BlackBerry, which has seen its share of the worldwide smartphone market erode over most of the last decade as Android and iOS have risen to dominance. And BlackBerry has suffered as margins in the device market have become razor-thin for most players.

But the company has moved aggressively into the patent licensing business. Earlier this year it launched a software licensing program for its mobility solutions business, introducing a suite of productivity and communications applications for Android devices. It recently filed a patent lawsuit against Avaya, claiming the telephony firm infringed on eight U.S. patents, and last month it filed a lawsuit claiming Blu Products had infringed on 15 of its patents.

Shares of BlackBerry were up roughly 3 percent in pre-market trading this morning following the news.

For more:
- see BlackBerry’s press release
- read this Reuters report

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