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Life by a thousand cuts: how BlackBerry plans to be profitable by 2016

BlackBerry z30 hands on

If BlackBerry is to claw its way back to profitability after losing more money in one quarter than it made in the past four years, Interim CEO, John Chen, must take drastic action.

Some of these actions were already outlined in today’s earnings call, and place BlackBerry firmly in the hands of a leader willing to make changes — and cuts — his predecessors were far more reluctant to set in motion.

The company doubled down on its intentions to reduce its presence in the consumer market, without leaving it entirely, by outsourcing its handset design and manufacturing to Chinese giant, Foxconn. Chen also plans to open up a “security technology centre” in America’s capital, Washington D.C., in order to work more closely with their government allies like the Pentagon and Department of Defense.

Claiming next year will be an “investment year,” Chen intends to stop the bleeding as soon as possible. He will stay on as CEO until the board sees light at the end of the tunnel, and even then may continue at the company in some capacity. He also intends to make the company profitable by 2016, increasingly by growth in the enterprise and new revenue sources like BBM than through further job cuts.

The company is already down 4,500 employees, and has been selling off superfluous land and assets to return to black ink. But perhaps BlackBerry’s biggest saviour, and what will likely be seen as a shrewd move by former CEO, Thorsten Heins, is the Foxconn partnership. “I have to do well with my enterprise software,” he said told The Financial Post, explaining that he will attempt to derive profit, even a minuscule one, from the contracted handset division, but going forward the company’s focus will be on software and services. Foxconn will only design the handset enclosures and assemble the parts; none of BlackBerry’s technology, nor its core assets, will be licensed to the Chinese firm.

In the end, a profitable BlackBerry will be one that focuses: a ruthless focus on enterprise software, both on the client and IT side, and a commitment to small, measured improvements. There are also a number of ways that QNX, BlackBerry 10’s underlying engine, could triumph in the car and in the burgeoning M2M market.

A year from now, Chen intends for the company to be out of harm’s way — not necessarily turning a profit, but no longer losing prodigiously, either — with a goal of making a profit by early 2016.

According to investors, whose confidence in Chen have caused the stock to rise 15.5% today to $7.23 on the NASDAQ — still nearer to a 52-week low than a high — there is hope yet for the company. Whether Chen or his successors will be able to return BlackBerry to profitability remains to be seen, but there a lot of Canadians who certainly want it to happen.

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