BlackBerry takes another swing at better smartphone sales with an Android device

With its hardware sales still flagging BlackBerry's chief executive John Chen says he's found a different way to sell his devices.

WATERLOO, Ont. — With its hardware sales still flagging BlackBerry’s chief executive John Chen says he’s found a different way to sell his devices.

For the first time in BlackBerry’s history, the company is going to sell a smarphone that runs on somebody else’s programming rather than its own in-house creation.

BlackBerry will release the Priv phone later this year, which uses Google’s popular Android operating system.

The switch was a controversial decision at BlackBerry, Chen said in an interview Friday with reporters at the company’s Waterloo, Ont. headquarters, but it addresses one of the biggest marketing problems BlackBerry faced in recent years: its phones are missing some of the most popular apps and games used by most customers and even businesses.

“I am now going to eliminate apps as an excuse not to buy our phone,” Chen said. “We’ll see how it goes.”

Amid all of the financial troubles of recent years, BlackBerry’s lack of apps has been a thorn in its side. Handfuls of popular apps, from dating service Tinder to Candy Crush, were unavailable for years.

Chen tried to remove that problem last fall in a partnership with the Amazon Appstore, which offers thousands of apps built for the Android operating system.

His hope was that Amazon’s store would see its app selection multiply quickly after the launch of the Amazon Fire phone last year.

“I was dying for Amazon to be successful with their phone,” Chen said.

But when sales of Amazon’s first device failed to ignite it left Chen in a partnership that wasn’t quite as ideal as he’d hoped — many apps, like Netflix and Snapchat, were still missing from the mix — and sales showed that customer weren’t swayed by the proposition.

BlackBerry hopes the Priv will give it another swing at making a smartphone that competes with the best of them, despite calls from some analysts for the company to shut down its hardware development all together.

Chen has remained a staunch supporter of BlackBerry phones partly because “marquee customers” like government agencies and other power players use the device, he said.

But the CEO plans to make an ultimate decision on whether to pull the plug on BlackBerry hardware during the next fiscal year, after the Priv hits the market.

“I promise you that I do not like running a business at a loss,” he said.

Whether introducing Google’s Android operating system into the mix will improve sales of BlackBerry phones remains to be seen.

BlackBerry (TSX:BB) missed already low expectations on Friday as its second-quarter financial results that showed it’s still struggling to turn around its business. The company reported a profit of US$51 million for the three months ended Aug. 29, which was an improvement on the year-earlier net loss of US$207 million.

But it fell short of expectations with an adjusted loss of US$66 million or 13 cents per share — deeper than the nine cents per share that had been estimated.

Revenue for the quarter dropped 46 per cent from a year ago to US$490 million, which was well below analyst estimates of US$611 million and the $658 million recorded by BlackBerry in the previous quarter that ended in May.

BlackBerry phone sales also continued their decline, falling to a dismal 800,000 units around the world, a further slide from the 1.1 million phones sold in the company’s first quarter.

Chen has focused on reworking BlackBerry’s operations since he joined in November 2013, with tight cost management and cheaper smartphone production being two major objectives.

Strengthening software licensing and services revenues has been part of Chen’s priorities. He said revenues for that part of its business grew 19 per cent to $74 milllion during the quarter.

The Waterloo, Ont.-based company has issued widespread layoff notices to its workforce this summer.

Over the past few weeks, those reductions have centred on deep cuts to its hardware development and manufacturing business as it puts a lower priority on smartphone development, according to two sources who were familiar with the cuts.

Some of those employees have been told they will lose their jobs in November, one of the sources close to the matter said.

But the issue of further reductions wasn’t addressed in Friday’s press release or the analyst call.

The sources both say hundreds of additional jobs have been quietly shed over the summer, affecting software development jobs in Ottawa, manufacturing in Cambridge, Ont., and BlackBerry headquarters in Waterloo.

Chen told reporters at a media roundtable that it’s “hard to determine” exactly how many employees have been laid off because the figures are complicated by recent hirings in certain divisions and the acquisition of other technology companies.

“I’m sure there will come up with a net reduction of some sort, but it’s not going to be that big,” he said, declining to get more specific.

He noted that when factoring in recent hires BlackBerry has about 3,000 employees across all of its Canadian operations, which is about 500 fewer workers than a year ago.

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