BlackBerry’s CEO John Chen hinted that the company might get out of the devices business if it can not make money.
He later revised and clarified his statements, but nevertheless it caused a lot of confusion.
But BlackBerry can not divest out of its devices unit even if it wanted to, because it’s an integral part of its existence.
If I cannot make money on handsets, I will not be in the handset business. You have to live short term. Maybe the prior management had the luxury to bet the world would come to it. I don't have the luxury at all. I'm losing money and burning cash.
The next day however he changed his wording, posting on the official BlackBerry blog saying:
Yesterday, Reuters published an article that said I would consider selling our Devices business. My comments were taken out of context.
I want to assure you that I have no intention of selling off or abandoning this business any time soon. I know you still love your BlackBerry devices. I love them too and I know they created the foundation of this company. Our focus today is on finding a way to make this business profitable.
Let me make one thing clear, BlackBerry might not be only a handset company anymore, but the company's handsets are the centerpiece of its business and existence.
BBM has became popular because people used it to send text messages to other users on other devices (not in thin air). BBM was never a stand alone application that existed on the desktop.
BlackBerry has become the premier company providing top notch security, because of its handsets. It was the need for safe communications between devices by the enterprise that made BlackBerry what it once was, and not simply the fact that it had some sort of safe algorithm.
BlackBerry's MDM offering is designed around its devices and not for Apple's (NASDAQ:AAPL) iPhone. The company's server software continues to be designed around its devices, because of the special hardware design of its phones (devices). BlackBerry's MDM software can do things with BlackBerry devices that cannot be done on other devices.
As such, it is almost impossible for BlackBerry to stop making devices because they are a part of its existence.
Having said this of course -- and due to that the market is constantly changing -- with MDM and security more important than ever, it goes without saying that BlackBerry will focus more on security and device management, but that is no way means that its own devices are a thing of the past.
John Chen gave a small clue as to what this new frontier for BlackBerry might look like, when he said in the above blog letter that:
We offer an end-to-end solution and devices are an important part of that equation. That's why we're complementing our Devices business with other revenue streams from enterprise services and software, to messaging. We're also investing in emerging solutions such as Machine to Machine technologies that will help to power the backbone of the Internet of Things.
The term "Machine to Machine technologies" can mean a lot of things, but the key word is "Machine". Meaning that software will probably never be a BlackBerry stand alone product, but rather something that will involve devices or even desktops computers. In fact I have said for the longest time that BlackBerry needs a desktop version of BBM, and I am happy that we have heard many rumors surrounding this the past couple of months.
The Bottom line
While BlackBerry is not just a device company anymore, devices are an integral part of its existence. I think that BlackBerry cannot divest of its devices unit even if it really wanted to. But if it ever does, then it will no longer be a devices company, but something else.
And I am glad that John clarified (and revised) his original statements, because simply being an MDM company, BlackBerry cannot support a much higher valuation.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.