BlackBerry's New Phone Switches to Android

Revenue May Have Plummeted but the Worst Is Over, CEO Says

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BlackBerry CEO John Chen said the company has found the low-point of its turnaround after second-quarter revenue plummeted and smartphone shipments hit their lowest since at least 2007.

Mr. Chen reassured investors he'll bring in $500 million in software revenue by March 2016 and stabilize shrinking device sales with the help of a new phone called the "Priv" that runs Google's Android operating system. Total revenue will rise slightly next quarter, the CEO said on a conference call Friday.

The chief executive has been working to transform BlackBerry from the shrinking smartphone maker he inherited two years ago into a leading provider of security software for businesses. Revenue has continued to drop quarter after quarter even as Mr. Chen managed to post profits earlier this year by cutting costs. With smartphone sales still accounting for about 40% of revenue, the company has continued to announce new devices.

By changing operating systems, Mr. Chen is betting that combining BlackBerry's reputation for security with Android's huge market will stop losses from BlackBerry's device division and allow the company to focus more on developing its software products.

"This phone is the answer for former BlackBerry users who miss the physical keyboard but also need apps," Mr. Chen said.

Smartphone sales could use a shot in the arm. BlackBerry shipped 800,000 phones in the quarter, the lowest in at least eight years, according to data gathered by Bloomberg.

"The device business, I would say, is not dead yet but in bad shape. Eight hundred thousand units is really nothing," said John Butler, senior handsets analyst at Bloomberg Intelligence.

If BlackBerry sees success with the Android phone, it might choose to cut its own operating system altogether, Mr. Butler said.

"If that effort proves successful and the devices resonate with the core customer base they've always gone after, which is government and enterprise, then what's the rational for sticking with a proprietary operating system with no apps?," he said.

-- Bloomberg News

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