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 John Chen, who took the reins at the struggling mobile technology
company in November 2013, has moved rapidly to try to get the
one-time investor darling back on track. The company has sold
assets, struck partnerships to lower manufacturing costs and broaden
app offerings, and raised cash via the sale of real estate holdings
in its hometown of Waterloo, Ontario.
"Once we turn this company to profitability again, I will do
everything I can to never lose money ever again," Chen told Reuters
in an interview this week. "That is definitely something I am very
focused on doing."
The Hong Kong-born executive, 59, made his name at Sybase, a
struggling database software firm that he rescued and sold a decade
later to SAP for $5.8 billion in 2010.
"If you look at my track record at Sybase, I think we made money for
some 60 quarters in a row, even when the dotcom bubble blew up we
were profitable. I like that philosophy," said Chen, who added he
believes the worst is now behind BlackBerry.
"We will survive as a company and now I am rather confident," he
said. "We're managing the supply chain, we are managing inventories,
we are managing cash, and we have expenses now at a number that is
very manageable. BlackBerry has survived; now we have to start
looking at growth."
A year ago, the smartphone industry pioneer was in the midst of a
painful restructuring, scrambling to find a suitor and trying to
play down media reports of its "death spiral."
A year after Chen stepped in as CEO, BlackBerry may have regained
some of its lost swagger. The company is hiring again and though it
has yet to turn steady profits, Chen has begun acquiring small
companies and investing in growth.
"He stepped in to catch a falling knife, which is what BlackBerry
was at the time losing $1 billion plus," said Prem Watsa, whose
Fairfax Financial Holdings Ltd is a major shareholder and which
helped bankroll a debt recapitalization that led to Chen's arrival.
"He came in and very quickly stabilized it and very quickly laid out
a roadmap to breakeven."
CONCERNS LINGER
The company is not out of the woods yet - even Chen stops short of
saying the turnaround has succeeded - but talk of the company
sliding into oblivion has faded.
"John Chen has succeeded in changing the conversation about
BlackBerry, and that is probably true both internally as well as
externally," said IDC technology analyst John Jackson.
Despite the progress, many analysts are yet to be convinced. Thomson
Reuters data shows that 25 of 37 analysts covering BlackBerry have a
'hold' rating on the stock. Only one has a 'buy' rating and the rest
rate the stock a 'sell.' And although its shares have strengthened
since Chen's arrival, its Toronto-listed stock has been bound in the
C$6 to C$12.50 range in the last 12 months.
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"Overall we think John is doing a solid job, but our concern
continues to be: how will BlackBerry drive demand for its product,"
said Morningstar analyst Brian Colello. "The demand side of the
equation is still a concern, both around selling millions of devices
each year and converting enterprise software users into paying
buyers in a very competitive market."
To spur growth, BlackBerry is launching its latest mobile device
management platform, BES 12, this week. The system will allow
companies and government agencies to manage and secure not just
BlackBerry devices on their internal networks, but devices that run
on rival operating systems such as Android, Windows and Apple's iOS.
In December, the company will launch BlackBerry Classic, a device
similar to its once popular Bold smartphone.
NEW DEVICE PLANS
In September, BlackBerry reported a profit, on an adjusted basis,
from its struggling handset business for the first time in five
quarters. Tough competition from Apple, Samsung and other rivals has
eaten into BlackBerry's once dominant market share, hurting revenue
and profitability in both the unit and company.
BlackBerry is "reasonably comfortable" it can keep making money from
its handset business, given operating margins, Chen said, noting
orders for its new unconventionally-shaped Passport device have
increased.
"I'm happy in the receptivity of the design. I'm happy that this
product is a successful product, but we did not make that many of
them, so it is in limited supply almost everywhere."
There is no final decision yet on what new devices will be launched
in 2015, said Chen adding that the focus will be on a core set of
smartphones that are most likely to succeed. That includes at least
one radically new device and product refreshes on its Passport,
Classic and its mid-level Z3 touchscreen phone.
"I'm not going to build a general purpose device, simply because it
is a 5-inch touchscreen," he said, referring to the wide array of
fairly standardized touchscreen smartphones in the market right now.
"The Chinese can build one for 75 bucks, I can't get enough parts
together for 75 bucks."
(Reporting by Euan Rocha; Editing by Frances Kerry)
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