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BlackBerry’s licensing strategy goes forward as turnaround continues

A reporter uses a Blackberry device to photograph Blackberry CEO John Chen as he speaks to reporters following their annual general meeting for shareholders in Toronto, in this file photo.

MARK BLINCH/REUTERS

BlackBerry Ltd. doesn't make hardware any more, but that isn't stopping chief executive officer John Chen from envisioning his company's name on tablets, wearables, appliances, medical devices – and even "Internet-enabled shoes."

The one-time smartphone giant announced in September that it was outsourcing manufacturing of handsets, opting to focus instead on software and cash in on the BlackBerry name through licensing deals with phone makers.

On Friday, the effects of that decision were clear: BlackBerry revealed hardware sales of just $55-million in the fiscal fourth quarter – the lowest since Mr. Chen took the reins at the company. By contrast, hardware accounted for approximately $350-million in sales in the fourth quarter of 2014.

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And yet the biggest revelation Mr. Chen made on Friday centred on hardware. He teased investors with the claim that a new BlackBerry tablet was around the corner.

A new PlayBook? Not quite, he clarified, using the example to tout an expansion of the company's licensing strategy beyond smartphones to tablets and other hardware – and software, too.

"I think Intel Inside strategy is a great strategy," he said, referencing the 1990s branding of personal computers with the chip maker's name. "I think we have every right to play in that strategy especially in mobile software and security."

This approach would build on the licensing deals the company has struck so far in the smartphone space with China's TCL Communication, Indonesia's PT BB Merah Putih and Optiemus Infracom, which plans to sell BlackBerry-branded phones in Nepal, Sri Lanka, Bangladesh and India.

In those deals, BlackBerry collects a royalty on every device shipped, and while the company hasn't reported revenue on any of those partnerships yet, it is aiming to do so in the 2018 fiscal year.

In this world, Mr. Chen said even people who make "Internet-enabled shoes" would recognize they could call BlackBerry for expertise in embedded software, as well as brand association.

In BlackBerry's enterprise market, software and service revenues hit $182-million for the quarter. While the company said it hit its target of 30-per-cent growth in annual software sales, it predicted growth will slow to 13-15 per cent in the next fiscal year.

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Mr. Chen also confirmed the company has finished digesting the companies – such as Good Technology and Secusmart – it purchased in 2014 and 2015 and is ready to begin shopping again, putting its $1.7-billion in cash to work investing in the automotive-software market.

On that note, BlackBerry said its QNX unit has now captured 60 per cent of the automotive infotainment market and Mr. Chen said he sees potential to add as much as three or four times the revenue per vehicle by adding security to more in-car computer modules.

BlackBerry's loss for the quarter was $47-million, or 9 cents a share, and its total revenue fell to $286-million, down 38 per cent from a year ago.

Still, Mr. Chen feels operations are more stable, calling the ability to pay down and renegotiate some debt during the fiscal year a watershed moment.

Reflecting on the turnaround journey thus far, Mr. Chen said he thinks the seeds he has planted in his first three years may finally start bearing fruit now that he has managed to "take all the lemons off the tree."

Pausing for effect, he then warned: "There might be a last cup of lemonade."

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About the Author
Technology reporter

Shane Dingman is The Globe and Mail's technology reporter. He covers BlackBerry, Shopify and rising Canadian tech companies in Waterloo, Ont., Toronto and beyond. More

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