Why BlackBerry will stop making its own phones

Blackberry stops making phones: The tech company announced Wednesday that it will outsource all future hardware development, marking the latest step in an ongoing transition from a focus on smartphone production to a focus on software. 

First Look

After struggling for years to keep up with increasingly ubiquitous iPhone and Android handsets, BlackBerry will no longer design or build its own phones.

The announcement that BlackBerry will outsource all future hardware development to its partners is the latest step in an ongoing transition by the tech company from a focus on smartphone production to a focus on software.

"Today we make our first significant step toward leading as a software company by announcing that we are transitioning from doing internal handset hardware development to leveraging our third party partner to provide that function," said BlackBerry's chief operating officer, Ralph Pini, in a blog post Wednesday. "This is what the future looks like for our business, and it is the right move as we progress towards profitability." 

As The Christian Science Monitor reported in July: 

While BlackBerry is reportedly planning to release three new Android phones in the coming year – two with full touch screens and one with the iconic QWERTY keyboard – the company has ... begun to shift its focus from smartphones to software used by companies and governments to manage their mobile devices. 

Adjusted software and licensing revenue was $166 million in the fiscal first quarter of 2017, compared to $152 million for devices, breaking even overall. The company's annual software revenue was $527 million in its last fiscal year, and it's targeting 30 percent organic growth, Reuters reports. 

The transition from phones to software has been a long time coming in the eyes of some industry experts. Roberta Cozza, a research director at the industry analyst Gartner, told The National in April that Blackberry had "lost the consumer [handset] market a while ago."

"They really need to consider how profitable such a segment is," Ms. Cozza said. "They could feasibly carry on in what is now a very small market segment but they have to ask themselves, 'is this what the company should really still be focusing on?'" 

Some have questioned whether the move to outsource phone design goes far enough. 

"BlackBerry can't keep producing its own phones indefinitely just to serve a small subset of its clients addicted to its home-grown devices," Ben Wood, a researcher with CSS Insight, told BBC. "BlackBerry had made no secret of the fact that it might shut down its own phone-making business. Pushing it out to a third party is a sensible solution - but any manufacturer making BlackBerry branded devices will ultimately face the same challenges."