BlackBerry Opts Out of a BYOD World

CEO John Chen explains what he meant.

Apr 12, 2014 at 2:00PM

This story originally written by Nancy Gohring at CITEworld. Sign up for our free newsletter here.

Will he or won't he? The buzz since last night has been around comments that BlackBerry (NASDAQ:BBRY) CEO John Chen made to Reuters, saying that if he can't make money on handsets, he'll get out of the business.

Naturally, the reaction was that it's only a matter of time before BlackBerry stops selling phones. This morning, Chen tried to do some damage control.

"My comments were taken out of context. I want to assure you that I have no intention of selling off or abandoning this business any time soon," he wrote in a blog post.

See also: Blackphone maker Silent Circle climbs the security cliff one step at a time

What does this all mean to you? If you had considered BlackBerry a contender as a phone that you'd buy and use for personal reasons and for work, forget it. BlackBerry is no longer interested in competing for BYOD business.

Chen made his intentions much clearer in a Bloomberg interview this morning. He's hoping to replace declining hardware sales with software, a higher-margin business. Doing so, BlackBerry can become profitable on the same level of revenue, he told Bloomberg.

He reiterated that BlackBerry intends to focus on highly regulated industries, the kind that tend to have strict security requirements.

Because of those requirements, these businesses are more likely to issue phones to users. Or, they may let users choose their phone but stick with BlackBerry's backend servers, which they may have used for years and which now secure non-BlackBerry handsets.

Chen hammered home the idea that BlackBerry has lost interest in the consumer and thus the BYOD market when he discussed the falling out the company has had with T-Mobile (NASDAQ:TMUS). BlackBerry pulled its phones from T-Mobile following a T-Mobile promotion that rewarded customers for switching from BlackBerry phones.

He told Bloomberg that cutting ties with T-Mobile was easier than with AT&T or Verizon, given that T-Mobile is focused on consumers and not enterprises.

In a world that's increasingly supportive of BYOD, it's hard to see how Chen's strategy will keep BlackBerry phones alive. He might be able to continue to develop BlackBerry's server products to attract the most security conscious businesses. But since the server now supports other handsets, there's little reason for buyers – be they companies that are issuing phones or individuals told they can buy what they like -- to choose BlackBerry phones. 

Chen meant it when he told Reuters that he'd get out of the handset business if he can't make money off it, and it's hard to see how he can make money on such a tiny slice of the market. BlackBerry handset sales have already dropped below 1 percent globally. 

Recode's Ina Fried is right when she says that Chen's comments to Reuters were meant for a Wall Street audience, while his backpedaling blog post was meant to reassure customers that they made a good bet when they bought a BlackBerry phone. It's likely just a matter of time before Chen decides that he can't make money on his handset business and so it's time to get out. 

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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