Blackberry Will Stop Making Phones to Focus on Security Software

The day most of us figured was coming eventually has finally arrived. Yesterday, alongside the company’s Q2 earnings announcement, BlackBerry CEO John Chen confirmed that the onetime smartphone leader will no longer manufacture their own phones. But, from the looks of things, it might just be confirmation of a change that was already put into motion earlier this year.

During the Q2 earnings announcement, Chen said, “the company plans to end all internal hardware development and will outsource that function to partners. This allows us to reduce capital requirements and enhance return on invested capital.” So, while BlackBerry won’t make their own phones, they will outsource manufacturing to other companies, much like what Google does for their Nexus devices. From what we’ve seen out of BlackBerry this year, it seems like this decision was made by at least July, when BlackBerry announced they would cease production of the BlackBerry Classic, the most recent version of their half-keyboard/half-display form factor. Later in July, BlackBerry announced an Android handset called the DTEK50, but the similarities of that phone to the Alcatel Idol 4 made many suspect BlackBerry had outsourced production.

BlackBerry stock jumped up 5.7 percent yesterday, and it’s little wonder why. What remains of BlackBerry’s reputation is tied to security features and productivity, both of which stemmed mostly from the company’s software. Not only does the decision to move away from hardware play to the company’s strengths, it puts them on much more stable footing financially. Hardware is very costly to produce, and with the Android handset market flooded with phones made on razor-thin margins, BlackBerry didn’t stand to gain much. Software is far less costly to produce, which should make it easier for BlackBerry to start growing again.

Now that BlackBerry has made it official, it’ll be interesting to see where they go from here. The DTEK50 was an Android phone with a BlackBerry overlay, but we’d think that as a software-only company, BlackBerry would try to double down on the BlackBerry 10 OS — having your software company depend wholly on the software of another company doesn’t seem like the most secure business model. The hard part will be finding hardware manufacturers willing to take a risk on a BlackBerry phone. But, even with that hurdle, it feels like BlackBerry has more cause for optimism than they’ve had for a long time.

Via The Guardian