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BlackBerry's CEO Says 5 Million Phones or Bust

By Daniel B. Kline - Oct 19, 2015 at 4:00PM

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If the company can't hit that goal, then it may exit the handset business.

The way the public perceives BlackBerry (BB 7.08%) and the way the company operates no longer match.

Most regular folks not heavily immersed in the brand's operations think if it as the maker of the iconic phone that carries its name. Even though the highly recognizable handset with a physical keyboard has fallen out of favor in recent years (though nobody has told Hillary Clinton), it's still a sight that most people recognize from its peak of popularity.

There was a time when owning a BlackBerry was a status symbol for businesspeople, politicians, and anyone trying to look important. As recently as the second quarter of 2012, the company's phones held nearly 5% market share, according to IDC.

Those days, however, are long gone and the company has slipped to a 0.3% market share as of the second quarter of 2015. Essentially, the only people still using BlackBerry handsets are the same folks who still think it's cool to say "talk to the hand" while wearing Crocs.

To put that number into context, it's well behind the 2.6% share held by Microsoft's (MSFT 3.42%) Windows phone. If there is room for a third major player in the wireless spaces, then BlackBerry likely needs to at least equal, if not surpass Microsoft for carriers to even consider stocking its phones.

The Blackberry Passport was well reviewed but didn't sell well. Source: BlackBerry.

Phones are not the company
As the BlackBerry phone has slipped in sales, CEO John Chen has admirably shifted his brand's business into software and services and moved away from relying on hardware sales. Now, the company is trying again to reignite its handset business with the first BlackBerry powered by the Android operating system. It's a bold idea that might work or it might be too little, too late.

The success or failure of this new phone, the BlackBerry Priv, will determine whether the company's handset business lives on or whether it becomes a piece of electronics history.

Chen has set some clear numbers
In recent years Chen has made vague statements about exiting the handset business if it no longer made sense. Now he has set some hard numbers as to how many phones the company needs to sell in order to keep trying.

In an interview at the Code Mobile conference, Chen told The Verge that his goal is to sell 5 million smartphones a year -- the number that would make that division profitable. If that doesn't happen, he told the tech news site, BlackBerry could exit the handset business.

That's not a crazy number, but to reach it the company would have to grow the 800,000 phones it sold in the most recent quarter by more than 50% a quarter. Whether it happens will probably hinge on the success of the Priv, BlackBerry's upcoming phone powered by the Android operating system rather than its own.

The company will still support phones running its BB10 OS, but he told The Verge that "the market for BB10 devices has been squarely in the high-security business, such as governments and hospitals," which don't upgrade their devices very often.

It's hard to say goodbye to yesterday
Five million phones in a year is a tiny amount. Microsoft shipped nearly nine million Windows phones in the second quarter of 2015, according to IDC. So, in setting his number, BlackBerry's CEO is being a realist and setting a bar which crossing would not even make the company successful -- it would simply demonstrate enough hope to be worth continuing. 

Many companies have gone down the tubes trying to cling to past glories. Chen has done an admirable goal in transforming BlackBerry's business so its fate no longer lies in the handset business, and he's smart to be willing to walk away if it's not making money.

The company does have a tremendous amount of equity built up in its brand name. but that doesn't matter if consumers consider its device a relic of the past. Selling 5 million units is a very modest goal, and if Blackberry can't reach it, then the company should allocate its resources elsewhere.

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