BlackBerry confirms it will end in-house hardware development, will outsource to partners instead

Ailing mobile phone giant BlackBerry has confirmed long-standing rumors that it would stop making hardware, and instead would focus on software and services.

Announcing its Q2 Fiscal 2017 financials today, BlackBerry revealed that it made a mere $352 million in the last quarter, down by more than $100 million year-on-year and down by $1.3 billion on three years previous. But buried within all the financial hullabaloo, CEO John Chen said that the company would now move to outsource its hardware manufacturing to third parties, and announced its first such deal.

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“Our new Mobility Solutions strategy is showing signs of momentum, including our first major device software licensing agreement with a telecom joint venture in Indonesia,” said Chen, in a press release. “Under this strategy, we are focusing on software development, including security and applications. 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.”

Ahead of BlackBerry’s earnings today, chatter on Wall Street had speculated whether the company would announce the death-knell to its mobile phone business. While the rumors weren’t based on any specific new information, references were made to a comment that Chen made a year ago, when he said that he would have to consider exiting the hardware business if it wasn’t profitable. He repeated that assertion earlier this year, when he said to CNBC: “If by September, I couldn’t find a way to get there [make a profit], then I need to seriously consider being a software company only.”

Once a major force in the mobile phone realm, BlackBerry has struggled in the hardware market for some time. In 2007, when it was known as Research in Motion (RIM), BlackBerry saw its share value peak at $236. In recent times, that figure has hovered at around the $7 mark. In 2009, the company was shipping up to 20 percent of all smartphones globally and claimed more than 40 percent of the smartphone OS share in the U.S., but those numbers have recently fallen to less than one percent.

As such, BlackBerry has continued to ramp up its enterprise services, including mobile security, and it’s this that the company will lean on moving forward.

“We are reaching an inflection point with our strategy,” added Chen, in a statement that evidently sought to bury the biggest news in the company’s history. “Our financial foundation is strong, and our pivot to software is taking hold. In Q2, we more than doubled our software revenue year over year and delivered the highest gross margin in the company’s history. We also completed initial shipments of BlackBerry Radar, an end-to end asset tracking system, and signed a strategic licensing agreement to drive global growth in our BBM consumer business.”

Today’s news comes two months after BlackBerry revealed it would no longer manufacture its BB10-powered BlackBerry Classic smartphone, instead focusing on a new range of Android devices. Indeed, despite reports of lukewarm sales of its first Android smartphone, the BlackBerry Priv, reports surfaced in June that the Canadian company was working on three new Android handsets. The first of these follow-up Android phones officially came to light in July, with the mid-range DTEK50, which launched in eight countries.

To be clear here, BlackBerry hasn’t announced the end of the BlackBerry brand in the mobile phone market — it is merely ceasing to make the devices in-house. But nonetheless, this marks a landmark moment, not just in the company’s history, but across the entire mobile phone industry.