How BlackBerry moved its cheese back

By: | Updated: May 11, 2015 9:55 AM

The smartphone company now gets more revenue from software and services.

blackberry While its own device base shrinks, BlackBerry is seeing a bigger opportunity in being able to secure smartphones of all brands, shapes and sizes. (Reuters)

The transformation of BlackBerry is near complete. The Canadian smartphone maker is now an enterprise facing software company and that shows in its books. In the last quarter, only 42% of its revenue came from hardware, the rest was all from its services and software offerings.

Having realised that they can’t really compete with the Chinese brands in the sub-$150 category, which account for almost a third of all smartphone sales, the company seems to have reconciled to the fact that it will be a niche player in the smartphone segment. “We will continue to be a serious player in the mid to high segment. That is where the new BlackBerry Leap will come in,” explains BlackBerry India MD Sunil Lalvani. The company is convinced that its strengths lie in being the most secure smartphone ecosystem and its ability to offer the best keyboard and virtual typing experience. Its next big launch will be the slider which will tap into all of these strengths.

While its own device base shrinks, BlackBerry is seeing a bigger opportunity in being able to secure smartphones of all brands, shapes and sizes. “BlackBerry is cash flow positive and has $3.27 billion in cash and investments. We are using this to innovate further. In the last financial year we acquired two companies—Movertu and SecureSmart—and followed it up with the acquisition of WatchDog in a few days back. So we are acquiring companies focused on certain industry segments and our core strengths, typically in the enterprise segment,” adds Lalvani.

“In the last 12 to 18 months our effort has been on going back to our core by focussing on differentiated solutions and services that drive uptake in enterprise. The mix of devices like Passport and Classic along with our new services and software has contributed to quarter-on-quarter growth. As it stands, BlackBerry India continues to be among the top tier countries globally for the company powered by growth in our software revenue,” he says.

Lalvani says that they are going back to their core customers with the new product offering from BlackBerry. “The beauty of these products are that they work across platforms. We are telling them that they do not have to throw out existing devices or move to BlackBerry and can continue using existing low cost Androids. But think about security,” Lalvani underlines his pitch for existing customers. About 40% of large enterprises in India are using BlackBerry in some form or shape.

The company is now pushing its virtual SIM technology, a product created by Movertu, to service providers in India. With this technology consumers as well as corporates will be able to virtualise up to nine numbers in a single SIM, thus negating the need to carry multiple phones or SIM cards. However, the product will initially be limited to numbers from a single service provider due to regulatory hurdles.

Similarly, the company hopes its new BlackBerry Meetings app, that lets users organise video chats seamlessly with upto 25 others across platforms and devices, will find takers among small and large Indian companies. Even BlackBerry’s flagship Messenger software, which even now has over 100 million active users, is slowly shifting to an enterprise-first model. “The problem with services like WhatsApp is that your phone number is your identity and anyone can reach out to you. But on BBM it uses your PIN and that is more secure,” Lalvani says, adding that corporates are looking at OTT services as a security threat too as employees could share sensitive information on it. The new BBM Protected gives encrypted chats across platforms and lets people share documents too, but not outside the service. “The control here is always with the server and everything is audited and logged.”

“Suddenly, the pie for BlackBerry in India has grown because virtually every Android, iOS or Windows device in enterprise has become a possible client for us,” he says, adding that the new Enhanced SIM Based Licenses (ESBL) model makes it easier for smaller companies to adopt these technologies. In fact, the services cost as low as R199 per user per month. “That is a big cost saving for an SME. There is no infrastructure cost, there is no IT manpower.”

Lalvani says this unconventional approach is helping drive up the gross margins for BlackBerry. “Over the past few quarters our gross margins have been upwards of 45%,” he says, adding that only Apple does better on gross margins at the moment.

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