BlackBerry’s tie-up with Foxconn signals priority shift

May 20 2014, 06:46 IST
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BlackBerry CEO John Chen with the company’s Z3 smartphone, designed by Foxconn BlackBerry CEO John Chen with the company’s Z3 smartphone, designed by Foxconn
SummaryIndonesians have long loved BlackBerry devices.

Indonesians have long loved BlackBerry devices. When the company introduced a new phone two and a half years ago, a crowd at shopping mall here became so unruly — in part because of a half-price offer for the first 1,000 buyers — that riot police were rushed in to stand by.

But even in Indonesia, BlackBerry’s fortunes have changed. Last week, when the company started selling the Z3, a smartphone it made specifically for this market, consumers reacted with a collective shrug.

Nevertheless, the arrival of the Z3, a touch-screen device mainly notable for its budget-friendly $190 price, signals a new path for the struggling company.

BlackBerry, like most phone makers, has long contracted out the manufacturing of its phones, but the Z3 has also been designed and distributed by Foxconn Technology Group, the Taiwanese manufacturer.

BlackBerry’s partnership with Foxconn, a company perhaps best known as a builder of iPhones and iPads, comes at a critical time for BlackBerry. Although sales of the company’s devices have plummeted globally in recent years, the revenue from the phone business remains vital as John Chen, BlackBerry’s chairman and chief executive, tries to shift the organisation’s focus to services and software.

By reaching a deal with Foxconn, Chen may have bought himself some time — if only a little.

“John Chen is just sustaining the handset business as he sorts out the way ahead,” said Nick Spencer, an analyst with ABI Research in London.

“But at these low volumes, you wonder about BlackBerry’s viability. Consumer electronics is about scale,” he added.

While a four-hour tour of stores in Jakarta last week found no lines for, and relatively little shopper interest in, the phone, BlackBerry said in a blog post that the Z3 had attracted substantial interest and had sold out by Friday. It did not provide any sales figures.

During its last quarter, the company sold 1.3 million phones, compared with six million during the same period a year earlier. But without the phone business, BlackBerry would be a significantly smaller company.

In the last quarter, the ailing hardware business still generated 37% of BlackBerry’s $976 million in revenue. A year earlier, phones accounted for 61% of $2.7 billion in sales.

While Foxconn can’t do anything to reverse BlackBerry’s popularity slide, the partnership will eliminate several financial uncertainties for Chen.

A large portion of the $5.9-billion loss that BlackBerry reported for last year came from writing off unsold phones and unneeded phone parts. Foxconn now assumes

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