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Hold the phone: BlackBerry’s Chen hasn't given up on handsets – yet

It appears BlackBerry Ltd. CEO John Chen said something Wednesday that didn't quite come out right. That doesn't mean he was wrong to say it. But it does speak to how tricky the rookie executive's task is in communicating to two key audiences with different priorities – his customers on the one hand, and investors on the other.

In an interview with Reuters, Mr. Chen was asked what he would do with the beleaguered company's handset business – which made it famous but in recent years has been shrinking dramatically and bleeding red ink – if he can't make it profitable. "If I cannot make money on handsets, I will not be in the handset business," he replied.

Reuters dutifully reported that BlackBerry's CEO would consider exiting the handset business if he can't turn it around. It also reported that Mr. Chen believes he can turn a profit on handsets, even with shipments of as few as 10 million a year. (That's less than one-fifth of its shipments as recently as three years ago, although the company recorded revenue on only 1.3 million shipments in its most recent quarter, suggesting it's got some work to do.)

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But on Thursday morning, Mr. Chen saw fit to clarify. In a post on the Inside BlackBerry blog website, he wrote his comments in the Reuters story "were taken out of context," and assured BlackBerry handset users that "I have no intention of selling off or abandoning this business any time soon … Our focus today is on finding a way to make this business profitable."

Reuters, for its part, is standing behind its original reporting. BlackBerry is not suggesting that he was misquoted – only that there's more to the handset strategy story. Specifically, that Mr. Chen's priority is to restore the segment to profitability – not to devise an exit strategy.

There really wasn't that much new in Mr. Chen's quote in the Reuters interview, other than perhaps its bluntness. Pretty much from the day he started, late last year, Mr. Chen was clear that he wasn't going to continue losing money on the devices. His first choice is to find a way to make money on more modest handset volumes, but he won't wait forever for that to happen. He can't – the company simply can't afford it.

Investors needed to hear that, and they need to be reminded: More good money will not continue to be poured after bad in handsets, as the company's previous leadership did to its near-destruction. If investors were getting nervous that BlackBerry's recent recommitment to its popular function keys and its Bold handset were signs of backsliding into old bad habits, Mr. Chen's statement should have shaken them from such thoughts.

But customers who rely on the devices get understandably nervous with such blunt talk. They want to know that the company is behind the handsets, that it's not going to abandon them. It's hard to sell them when people aren't convinced you'll be there to support them. Hence the reassurances that BlackBerry is committed to the business.

The handling of the Reuters situation may have been a bit clumsy, leaving the sense of a mixed and inconsistent message. But the reality for both customers and investors is that the clock is ticking on Mr. Chen's turnaround plan, and his patience on handsets is limited. That's a message that both groups need to understand loud and clear.

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About the Author
Economics Reporter

David Parkinson has been covering business and financial markets since 1990, and has been with The Globe and Mail since 2000. A Calgary native, he received a Southam Fellowship from the University of Toronto in 1999-2000, studying international political economics. More


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