BlackBerry Passport: Why it represents the 'crux' of CEO John Chen's strategy

The BlackBerry Passport may have already been in the works before he came on board, but its release encapsulates the strategy chief executive John Chen has for the beleaguered company as it attempts to claw back market share in the smartphone industry.

CEO has done a good job, so far, in stabilizing BlackBerry's core business, analyst says

BlackBerry CEO John Chen sends a message on his new Passport device following its launch in Toronto. Chen took over the reins of BlackBerry back in November 2013. (Chris Young/Canadian Press)

The BlackBerry Passport may have already been in the works before he came on board, but its release encapsulates the strategy chief executive John Chen has for the beleaguered company as it attempts to claw back market share in the smartphone industry.

"​It's really the crux of his strategy," said telecom analyst Troy Crandall of MacDougall, MacDougall & MacTier. "This phone definitely seems to be moving along the strategy that Chen set out back when he became CEO and revamped the strategy for BlackBerry."

Chen, who took over the reins of BlackBerry in November 2013, is focusing on the corporate market — also known as the enterprise market — and targeting the regulated sectors that include health, finance, the military and government. All those sectors require high-level secure communications, and it's an area where BlackBerry is still considered an industry leader.

'Probably the direction they should go'

"It seems logical," Crandall says about Chen's strategy. "If it didn't seem logical, the stock would be well below where it currently is. So obviously the street also feels this is probably the direction they should go at this point."

The new Passport with its large square screen will certainly appeal to those in the financial sector needing to read spreadsheets, or to doctors wanting to look at X-rays or CT scans, Crandall said. And  it also comes equipped with a physical keyboard, a feature much valued by its core audience.

"The Passport is very clearly a business-centricproductivity-centric device, and that sort of focus is a really good thing," Jan Dawson, chief analyst at Jackdaw Research, a technology research and advisory firm, said in an email. "BlackBerry spent just a few minutes talking about more consumer-centric features like the camera and the Amazon App Store, which will provide consumer-centric apps, but the whole rest of the time was all about business and productivity.

BlackBerry on Friday reported a huge loss in the second quarter, on the heels of its release of the new Passport smartphone. (Chris Young/Canadian Press)

"That’s a recognition that that’s the one area where BlackBerry can compete now in smartphones, and that recognition is long overdue."

The smartphone launch comes days before the company reports on its second quarter earnings. BlackBerry continues to lose money and is expected to report negative earnings per share. And with the company still in its turnaround phase, revenues will continue to be down, Crandall said. 

But technology industry analyst Jeff Kagan said Chen has done a good job so far in stabilizing BlackBerry's core business. The bad news, he said, is that that core business now has a market share of less than one per cent.

While Kagan believes that BlackBerry will never be a strong competitor to the Apple iPhone, or the Samsung Galaxy or other Android phones, it can still be a viable, smaller competitor. That's why he expressed some disappointment in the Passport, which he said is receiving mixed reviews and may alienate some of BlackBerry's core consumers. 

"Blackberry could really have hit it out of the park if they focused on what their core really loved about their devices. I may be wrong, but I just don't see hardcore Blackberry users loving this strange little device," Kagan said.

'High-flying days have passed'

"The Passport will not help BlackBerry ride high once again," he said. "Those high-flying days have passed. The real question is will Passport capture enough market share to help Blackberry stay alive. We'll just have to wait and see."

Ultimately, Crandall said, BlackBerry wants most of its revenue coming from services, rather than the actual handsets, which are a fairly low margin device. (Chen caused a stir back in April when he suggested the company might exit the handset business — he later clarified his remarks).

But Chen has been putting more emphasis on BlackBerry's mobile device management (MDM) business, a collection of software that allows IT departments to manage different devices connected to their corporate networks. 

He has emphasized BlackBerry's popular BlackBerry Messenger (BBM) application which is now also available on Apple and Android devices. And Chen has said his long-term plans for BlackBerry include competing in the burgeoning M2M or machine-to-machine  business of connecting all manner of devices, from kitchen appliances to automotive consoles to smartphones

"Future growth will come, if it comes at all,  from growing the BBM base and MDM opportunity beyond just BlackBerry devices, and from M2M," Dawson said. "I think we might see modest growth at BlackBerry for a year or two, and then it’s a question of whether they can begin to capture a significant share of the new markets they’re going after.

"That’s pretty much up in the air at this point because they haven’t put a lot of flesh on the bones in terms of where they’ll take M2M and BBM going forward."


With files from The Associated Press, Reuters


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