While still releasing new devices, it seems new BlackBerry (NYSE:BB) CEO John Chen is giving the company a much-needed transition. After defining the smartphone by adding email functionality to a mobile device, the company had a brief stint as the smartphone market leader before rivals built upon the product by adding vibrant ecosystems complete with apps and games. BlackBerry could not compete and saw its market position erode to these two competitors.
After a failed takeover attempt from Fairfax Financial Holdings, and an unceremonious exit from former CEO Thorsten Heins, John Chen took the reins of what he referred to as a sick patient in an attempt to restore the Canadian technology giant to its former glory. To date, there have been successes, but the volatile stock has barely budged under his tenure.
As for his transition, it seems Chen is de-emphasizing BlackBerry's device business for its other divisions -- mainly, software and technology licensing -- as during his time at Sybase Chen produced a tremendous turnaround for the enterprise software and services company. If the newest acquisition for BlackBerry is of any indication, the company is looking to build upon its non-device focus by buying mobile-security company Good Technology.
If you can't beat em', buy em'
While BlackBerry's devices have been heavily faulted for design and a rather lacking ecosystem, one thing that remains true is the device is considered incredibly secure. So much so that President Barack Obama can only use a BlackBerry. Outside of government, BlackBerrys were also in demand on top Wall Street banks, as confidential information in that realm is potentially worth billions, and leaked emails end up making front-page news.
But more recently there's been a trend of separating these secure functions from the device. Perhaps the biggest beneficiary is mobile security company Good Technology, which has an email app that is slowly replacing the need for BlackBerry's devices. According to an article from Business Insider, Wall Street firms are migrating away from BlackBerry in favor of Good's app on high-end iPhones and Samsung's Galaxy devices.
Apparently, BlackBerry got the memo: The firm announced it purchased Good Technology for $425 million in cash.
A smart move for BlackBerry
Although the two had quite a bitter rivalry, which included numerous legal battles, it seems the two have finally buried the hatchet. And that's good news for BlackBerry because the company needs to focus. What this purchase seems to signify is that BlackBerry is looking to grow revenue and sales for its technologies on iOS and Android-based phones as it seems Chen understands the market for BlackBerry devices will continue to decline.
In addition, this purchase builds upon BlackBerry's legendary reputation for security and continues Chen's focus of forging BlackBerry to a software and services company. Last quarter, BlackBerry reported a year-over-year revenue drop of 32%. While most CEO's would be mortified by these results, Chen summarized the company's performance by saying, "I'm obviously pleased with the quarter," as he trumpeted the company's year-over-year software and technology licensing revenue increase of 150%. BlackBerry investors should continue to look toward non-device revenue for growth.