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BlackBerry CEO John Chen gestures as he speaks during the company's annual general meeting for shareholders. (MARK BLINCH/REUTERS)
BlackBerry CEO John Chen gestures as he speaks during the company's annual general meeting for shareholders. (MARK BLINCH/REUTERS)

New BlackBerry unit to capitalize on patents Add to ...

BlackBerry Ltd. has created a new division to leverage its patents and technology as the company continues to evolve from a loss-making smartphone maker to a leaner, more agile organization under its turnaround CEO John Chen.

The new BlackBerry Technology Solutions unit will house the Waterloo, Ont.-based firm’s vast portfolio of 44,000 patents. It will also seek to licence out technologies BlackBerry has gained over the years through acquisitions of companies such as QNX, which makes embedded software for automobiles; Paratek, which works on adaptive tuning technologies for handsets; and Certicom, which develops cryptography applications.

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BlackBerry’s new division will be headed by veteran technology executive Sandeep Chennakeshu, a former CTO of Sony-Ericcson who is the named inventor on 73 patents. He joins the company immediately.

“QNX, Certicom and Paratek are strategic and technically innovative assets with significant potential to address the much wider global markets for secure, reliable communications and embedded applications,” Mr. Chen said in a statement. “Combining all these assets into a single business unit led by Sandeep will create operational synergies and new revenue streams, furthering our turnaround strategy.”

The move to better exploit BlackBerry’s stable of technology assets comes after Mr. Chen winds down his cost-cutting measures, which have helped stabilize the company and reassure investors. In the first quarter of fiscal 2015, Mr. Chen announced that he had cut operating expenses by 57 per cent year over year, increased the company’s cash pile from $2.7-billion to $3.1-billion (U.S.) and boosted margins from 43 per cent to 48 per cent. Revenue in that quarter was down just 1 per cent from the year prior, to $966-million.

Mr. Chen has cut thousands of jobs, launched new partnerships with companies such as Amazon, and realigned the company’s business after the first handsets to launch on the company’s BlackBerry 10 software failed to sell in large numbers. BlackBerry’s revenue makeup has changed dramatically: In the fourth quarter of 2012, the company made 68 per cent of revenues from hardware such as phones, and just 32 per cent for software, services and other revenue; in the first quarter reported in mid-June, those numbers had basically switched, with just 39 per cent of revenues coming from hardware and 61 per cent coming in from software and services.

Years ago, according to one former BlackBerry executive, the company mainly used its patents as bargaining chips to eliminate the costs of gaining access to certain third-party technology the company lacked. BlackBerry was also focused on policing its own patents in the industry, ensuring that its products remained differentiated.

BlackBerry is moving to leverage those patents and its technology in an era with more Internet-connected devices. But it is unclear exactly how much cash the company can generate from its efforts.

“It’s surprising it took BlackBerry this long to place more emphasis on patent monetization,” said Florian Mueller, an industry consultant who works with companies such as Oracle Corp. and Microsoft Corp. “The decision was overdue, but the jury is out on whether its patents have a substantial revenue potential.”

Colin Gillis, an analyst at BGC Financial LP in New York, says Mr. Chen is beginning to focus on the company’s longer term growth strategy after getting costs under control.

“Right now, it needs to be proven. The concept sounds jazzy. But we need to have a lot of execution, and we need to have a marketplace,” Mr. Gillis said. “They seem to have the right person in to do it. It certainly could be meaningful. … Let’s see how it goes.”

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