BlackBerry’s new chief executive, rejecting calls to exit the hardware business, gets a chance this week to convince investors he has the time and vision to revive a unit whose sales are down to 2007 levels.
Handpicked by BlackBerry’s largest investor as chief executive, John Chen has been building his case that the company should keep its unprofitable smartphone business, even as investors and analysts urge it to focus on more lucrative software and services. Analysts expect a 42 percent revenue drop in quarterly results due today, putting pressure on Chen.
His reluctance to part with hardware echoes predecessor Thorsten Heins, who vowed when he joined in January last year not to break up the firm. Unlike Heins, Chen is an outsider who has orchestrated a software-led turnaround before.
“He’s got the mandate, I suppose the constraining factor is time,” said James Cordwell at Atlantic Equities. “A change in direction is what people need.”
Chen has begun cleaning house, with the recent departures of the previous marketing, operations and finance chiefs. On Tuesday BlackBerry announced the hiring of John Sims, a former colleague of Chen’s at Sybase and SAP, to run global enterprise services.
Two additional executives were named on Wednesday.
Analysts estimated BlackBerry would post quarterly sales of $1.58 billion (R16.3bn) and a headline loss of 45c a share. In September it took a write-down of almost $1bn for unsold Z10s and sales declined 45 percent to $1.57bn, the same level as six years ago. Sales peaked at $5.56bn in the quarter to February 2011.
More inventory write-downs were likely this week, making the future of BlackBerry’s hardware business the priority Chen had to address, said Mark Sue, an analyst at RBC Capital Markets.
BlackBerry optimists point to Chen’s experience at Sybase. When he took control of the business software maker in 1998, Sybase was trading near a record low. Chen expanded into mobile-data management. In 2010, he sold Sybase to SAP for $5.8bn, more than six times its value when he arrived.
But Chen says he has no plans to close the loss-making hardware business.
The shares have tumbled 22 percent since November 1, the last trading day before its biggest investor, Fairfax Financial Holdings, brought Chen in. – Hugo Miller in Toronto for Bloomberg