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BlackBerry Continues to Cozy Up With Android

By Jamal Carnette, CFA - Apr 13, 2016 at 6:24PM

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BlackBerry CEO John Chen announced two new smartphones in 2016. Both are Android-powered.

 From left to right: The BlackBerry Priv, Passport, and Classic. Image Source: Flickr user  WEI WEI.

BlackBerry (BB -2.00%) CEO John Chen is known in the industry both as a software guy and a turnaround specialist. Chen took the reins of software company Sybase in 1998 in the wake of a Japanese accounting scandal that led to the ouster of previous CEO Mitchell Kertzman. Under Chen, Sybase grew from a $362 million company with no profits to a successful entity. Sybase was eventually acquired by Germany's SAP in 2010 for $5.8 billion. 

Needless to say, investors are hoping Chen -- who took the CEO job at BlackBerry in 2013 -- can attain similar success with BlackBerry. However, a successful BlackBerry may no longer include the signature BlackBerry device. Chen, true to his reputation, has decided to focus on software and services with an emphasis on BlackBerry's reputation for security.

Perhaps the largest step away from BlackBerry's device and BlackBerry OS 10 was the company's partnership with Alphabet's (GOOG -1.29%) (GOOGL -1.34%) Android OS in last year's BlackBerry Priv. In a recent interview with The National, a United Arab Emirates-based newspaper, it appears Chen is doubling down on Android-powered smartphones.

2 Android units this year
On the heels of BlackBerry's fourth-quarter earnings, where the company reported lower-than-expected handset sales, Chen pointed toward price as the reason for underperformance. In the interview, Chen admits the Priv was "too high-end" for enterprise-focused buyers. Overall, BlackBerry reported selling 600,000 devices versus analyst expectations of 850,000 units. Shares of the company sold off 9% as investors reacted unfavorably to the news.

One thing Chen is not blaming for the poor performance is the Android operating system. BlackBerry's CEO told The National that BlackBerry would be launching two new Android-powered smartphones this year, "one with a physical keyboard and one with a full touchscreen," according to the post. While Chen did not go into great detail in the interview in regards to the new devices, he mentioned both units would be priced in the mid-range and also singled out a $400 price point as one enterprise-focused consumers would be comfortable paying.

What about BlackBerry 10?
Earlier this year, Facebook dealt a huge blow when it announced it would "discontinue support" of BlackBerry's APIs by the end of the year. After a social-media-inspired campaign, Facebook relented and allowed BlackBerry 10 fans to have a web-based app of Facebook's site. The problem is web-based apps generally present a poorer user experience than native apps, especially with device-specific integration like push notifications, calendars updates, and photo-sharing functions. Web-based apps are akin to bookmarking a website on your device's browser.

Curiously absent from Chen's device talk in the interview is a new BlackBerry-powered smartphone. BlackBerry continues to sell BlackBerry 10 devices, but has not announced a new BlackBerry 10 OS release since bringing the Android-powered Priv to market. In response to Facebook's initial announcement, BlackBerry reaffirmed its commitment both to BlackBerry 10 OS and its developers, but the company's silence in regards to a new BlackBerry 10 model appears antithetical to long-term commitment.


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