BlackBerry Ltd (BBRY) Will Offer Two New Android Smartphones

Blackberry ltd NASDAQ:BBRY

BlackBerry Ltd (NASDAQ:BBRY) recently conceded that the Priv was too expensive, and that’s why it wasn’t a success. The struggling smartphone and enterprise software maker plans to rectify that with two new affordable Android devices. The Waterloo-based firm did not provide a time frame for their potential releases.

BlackBerry Ltd to Release Cheaper Devices

Is this BlackBerry’s last chance to be successful in the smartphone market?

Blackberry ltd NASDAQ:BBRY

Speaking in an interview with The National, CEO John Chen said the firm plans to release an Android keyboard smartphone and an Android touchscreen. The two mid-range devices do plan to be a lot cheaper than last year’s Priv, which came with a $700 price-tag.

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Chen noted that the devices, which were targeted for the high-end market to compete with Apple Inc (NASDAQ:AAPL) and Samsung, sparked a lot of interest from its clients. Chen said, however, that they were more interested in a device that was around $400. And the proof is in the numbers: its sales dipped by close to $200 million in the quarter ending February and just 600,000 devices were sold.

“The fact that we came out with a high-end phone was probably not as wise as it should have been,” Chen told the United Arab Emirates (UAE) website.

In the near future, BlackBerry will have such devices available for its professional clientele. As of this moment, BlackBerry has zero intention to make handsets for its BB10 operating system. But it does intend to issue updates for current devices.

The question remains: will anyone really want to own another BlackBerry device in 2016? It’s an important question to ask, particularly when the latest Samsung Galaxy model sold 10 million devices since February.

Neil Shah, analyst at Counterpoint Research, says the conversation has been shifted. The change in conversation doesn’t bode well for the fledgling tech firm.

“While the BlackBerry brand is still strong and the value propositions usually have been centered around the best QWERTY keyboard, BlackBerry Messenger and secure platform, however, the conversation has changed,” Shah told CNBC. “Touchscreen has completely replaced the physical keyboard and is much better with predictive analytics capabilities. Barring Indonesia, BBM has been taken over by Whatsapp and other clones.”

So, for the time being, BlackBerry is yet to be done with the hardware market.

Should BlackBerry Ltd Just Focus on Software?

Last year, there was a Canadian newspaper that ran a headline that suggested if you love the BlackBerry brand then stop buying its phones. The purpose of the headline is to encourage the firm to focus on what it does best: software.

BlackBerry remains stubborn, though. Despite its hardware department not being profitable, Chen is working hard to make sure it becomes profitable. He recently revealed that the company needs to sell three million devices per year with a price of $300 just to break even. Is BlackBerry reaching these figures? Barely.

In its fiscal year ending Feb. 29, the firm reported a near 40 percent year-on-year decrease in hardware revenue. It sold just 3.2 million BlackBerry devices in fiscal 2016, a huge decline from last fiscal year’s seven million. This is where the switch to Android comes in.

Many analysts make the point that its hardware department could become profitable because of lower shipment volumes. In order to produce your own operating system and devices, shipment volumes have to be great. With the BB OS, that would be very difficult to achieve.

Is all of this hassle really worth it? There is no doubt that Chen is dedicated to the BlackBerry brand. He has turned down multiple buyout offers, even for $15 a share. Chen thinks he can get it higher than that threshold. However, to achieve that mark may not come from its hardware, but its software.

Globally, BlackBerry has close to 50,000 patents: basic functions of a mobile phone, security software and other features like keyboard predictive typing. These are quite valuable.

If BlackBerry continues selling smartphones then installing an Android OS was wise. But if BlackBerry wishes to make its value then it must grow its enterprise security software. This is how the company has completed many of its deals over the past year.

Chen may show that $10 a share is a bargain right now. But with a two percent market share in the smartphone market, it won’t be achieved that way.

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Andrew Moran

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