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BlackBerry to stop making smartphones

BlackBerry has struggled to keep up with competition from rivals Apple and Samsung.

BlackBerry CEO John Chen. Picture: Official BlackBerry Facebook page.

JOHANNESBURG - BlackBerry is shutting down its phone business after 14 years of making handsets. The company confirmed that it's out of the smartphone manufacturing business.

The company's devices were once the phone of choice for professionals, providing access to emails on the move, but BlackBerry has struggled to keep up with competition from rivals Apple and Samsung as mobile users increasingly opt for touchscreens.

Chief Executive Officer, John Chen, announced the new strategy as part of the company's Fiscal Q2 2017 report.

"Under this strategy, we are focusing on software development, including security and applications. The company plans to end all internal hardware development and will outsource that function to partners. This allows us to reduce capital requirements and enhance return on invested capital."

Revenue in the quarter was $352 million, missing estimates of $390 million.

BlackBerry will now focus on the software path that Chen has been pushing since he took over the CEO role, include licensing its hardened version of Android and the associated secure apps.

The company's device business, which it calls Mobility Solutions, will focus on developing applications and an extra-secure version of Google's Android operating system that it can license to other companies.

Chen said less than 100 jobs would be lost from its latest move away from making hardware.

The change would likely weigh on overall revenue for two more quarters before software revenue growth makes up for the decline, he said.

Revenue fell to $334 million in the fiscal second quarter ended 31 August from $490 million in the year-ago period, missing analysts' estimates of $393.75 million.

"This is an entirely sensible decision and probably an overdue one," said IDC technology analyst John Jackson. "Software revenue and the margin profile associated with that is where the focus should have been, and now can be."

BlackBerry said revenue from software and services was $156 million in its second quarter, down from $166 million in the first quarter. The device business accounted for $105 million in revenue.

BlackBerry also said Chief Financial Officer James Yersh would leave as of 1 October for personal reasons, and be replaced by former Sybase executive Steven Capelli.

Excluding large one-time costs, the company said it broke even in its second quarter. On that basis, analysts had on average expected a loss of 5 cents a share, according to Thomson Reuters I/B/E/S.

BlackBerry raised its full-year earnings outlook to a range of breakeven to a loss of 5 cents a share, excluding special items. It had previously expected a loss of 15 cents a share.

Additional information by Reuters