BlackBerry CEO hopes Passport key to revival

An attendee demonstrates a BlackBerry Ltd. Passport smartphone during a product announcement in Toronto, Ontario, Canada, on Wednesday, Sept. 24, 2014. The square-screened Passport is BlackBerry's first major new device slated for a global introduction since Chief Executive Officer John Chen set out in November to turn around the company by shifting away from the consumer market toward business and professional users. Photographer: Hannah Yoon/Bloomberg
An attendee demonstrates a BlackBerry Ltd. Passport smartphone during a product announcement in Toronto, Ontario, Canada, on Wednesday, Sept. 24, 2014. The square-screened Passport is BlackBerry's first major new device slated for a global introduction since Chief Executive Officer John Chen set out in November to turn around the company by shifting away from the consumer market toward business and professional users. Photographer: Hannah Yoon/Bloomberg

BlackBerry Ltd. unveiled the square-screened Passport phone at events around the world last week, as Chief Executive Officer John Chen works to win back business users even in the midst of a company turnaround.

"When you come out of restructuring, when you come out of financial problems, once you stabilize the company, customers and the market will only respond if you're innovating again," Chen said in an interview before Wednesday's announcement.

The Passport is BlackBerry's first major new device introduced globally since Chen was named CEO in November, the same day that a planned buyout of the Waterloo, Ontario, company collapsed. The Passport is geared toward professionals and is part of Chen's plan to ditch the company's flagging smartphone sales among consumers and instead concentrate on higher-margin services for corporations.

The new device may help BlackBerry bolster its financial performance, Chen said in an interview on Bloomberg TV.

"I've told people we will be profitable by 2016," Chen said. "If I could get some growth on the top line, I will be able to make it profitable sooner."

With a 4.5-inch screen and a physical qwerty keyboard that doubles as a touch-sensitive swipe pad, the Passport is focused on work productivity. That stands in contrast to Apple Inc.'s new iPhone 6 and larger iPhone 6 Plus that cater to video consumption for the consumer market.

The company unveiled the Passport at three events held simultaneously around the world. Chen also said the company plans to release the keyboard-equipped Classic smartphone by the end of the year.

BlackBerry is facing a shift in the business world with more workers using their own devices instead of employers providing them, meaning companies aren't trying to buy big lots of new handsets, said Ehud Gelblum, a New York-based analyst with Citigroup Inc.

"There's this concept that's been created about this being a seminal moment and this is the turning point," Gelblum said. "This is just yet the next step."

The Passport's target user base of "power professionals" refers to people who are educated, well-paid and employed in security-sensitive industries like health care and finance, said Marty Beard, BlackBerry's chief operating officer.

"Everything that we're doing at the company is pointed towards this segment -- all of our marketing activity, our sales activity, our partnering activity," Beard said in a briefing.

Professional users make up almost 10 percent of the global smartphone market, according to the company's research, Beard said.

The company also unveiled BlackBerry Blend, a program that allows employees to access work documents at home without using third-party applications like Dropbox or Google Drive. It will be available on Apple, Windows and Android devices, Jeff Gadway, BlackBerry's head of product marketing, said.

The phone is now on sale in Canada, France, Germany, the U.K. and the United States, and will be available in more than 30 countries by the end of 2014. The Passport also will be available through Amazon.com.

BlackBerry will sell the new handset for a limited time for $599 in the U.S. without a mobile plan, undercutting the iPhone 6, which sells for $649. Chen declined to say when the price will rise. AT&T Inc. will be the exclusive U.S. carrier for the Passport, BlackBerry said.

The global unveiling is part of Chen's plan to reach break-even cash flow by the end of this fiscal year and return to profitability during the fiscal year that will end in early 2016. For the quarter that ended Aug. 31, BlackBerry posted a loss of $207 million just days after the company launched a new phone.

If the Passport doesn't sell well, Chen says that won't derail his effort to save BlackBerry.

"It's just going to make the turnaround a little more difficult, but it's not going to stop the turnaround," Chen said. "This is going to do well."

Chen said he canceled some devices under development when he joined the company. The Passport, on the other hand, was more innovative with its unique form, he said.

Since taking the helm, Chen has outsourced manufacturing to Foxconn Technology Group and focused BlackBerry's efforts on selling device management and messaging software to security-conscious companies and governments. The company's software is now available on iPhones and Android devices, and Chen said such enterprise services are the most important part of his turnaround plan.

BlackBerry shares had risen 63 percent since he was named CEO, giving the company a market value of about $5.6 billion. It's still a far cry from the company's peak of $83 billion in 2008.

The company is trying to win back business users as its market is shrinking because more employees are opting to take their own devices to work, Gelblum said. He estimated the number of employer-provided phones bought each quarter to be about 1 million to 1.5 million, down from about 3 million four years ago.

There's stiff competition to win over consumers these days. BlackBerry shipped 1.5 million smartphones in the quarter ended June 30, according to research firm IDC, giving it a 0.5 percent share of the global smartphone market.

Apple sold a record of more than 10 million iPhones last weekend, the first weekend that its two new versions with displays of 4.7 inches and 5.5 inches were on sale in stores.

Information for this article was contributed by Doni Bloomfield and Emily Chang of Bloomberg News.

SundayMonday Business on 09/29/2014

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