For years, BlackBerry phones’ signature keyboard — a pragmatic, if unfashionable contrast to the sleek touch screens of iPhones and consumer models — was a popular feature among stalwart customers at businesses and federal agencies. At its peak in 2009, BlackBerry’s phones accounted for about 20 percent of the smartphone market, according to the research group International Data Corp.
Since then, amid competition from consumer-focused vendors such as Apple and Samsung, and increasingly common “bring your own device” policies permitting employees to access work correspondence from their personal phones, the Ontario company’s market share has steadily declined.
In 2014, BlackBerry’s market share plummeted to about 0.5 percent. Samsung led with 23.7 percent, followed by Apple with 11.7 percent, according to IDC. To compensate for falling hardware sales, BlackBerry has redirected its focus from the devices themselves to software and services, including those aimed at federal customers.
The new goal, BlackBerry Chief Operating Officer Marty Beard said in an interview, is to “innovate around the reality” of smartphone users who prefer non-BlackBerry phones. “There’s a perception in the industry . . . that we only support BlackBerry devices,” Beard said, but noted, “our software business has gone totally multi-[operating system].”
Despite shrinking revenue, in the past few months the company has announced several new applications that function on the Android, iOS and Windows operating systems — its popular messaging system BBM, or BlackBerry Balance, an app that separates work content from personal content, for instance. BlackBerry Enterprise Server is designed to manage thousands of employees, their devices and their applications in one system.
At the International CES expo in Las Vegas earlier this month, BlackBerry unveiled a new “Internet of Things” platform, designed to collect data from various trackable objects, such as automotive fleets. It also announced plans to make its messaging system available on Android-based “smartwatches.”
BlackBerry also announced a partnership with IT company Nanthealth to create a portable hub designed to collect data transmitted among patients, doctors and hospitals.
BlackBerry’s contracts with the federal government also reflect this new emphasis on software, according to Matt Hummer, director of analytics for government research analytics service Govini.
According to Govini, which tracks public records of federal contracts, BlackBerry’s contracts for new devices have leveled, while software contracts have grown. In 2011, BlackBerry’s federal contracts peaked at more than $90 million — by 2014, they had shrunk to about $40 million. (BlackBerry does not share financial figures about public vs. private customers.) This shift is due in part to bring-your-own-device policies at the department level, Hummer said — even the Defense Department has approved BlackBerry’s secure application for iOS and Android devices.
In general, Hummer said, “as agencies loosen up their policy around type of device that can be used . . . the commercial and public trending of purchases of smartphones would more align with the government’s.”
As of November, hardware sales constituted approximately 46 percent of revenue, and BlackBerry’s revenue and hardware sales have been declining sequentially. For the quarter ended Nov. 29, the company reported revenue of $793 million, down from $916 million the previous quarter and $966 million the quarter before that. In the quarter ended Nov. 29, the company sold 1.9 million smartphones, down from 2.4 million in the second quarter and 2.6 million in the first quarter. (BlackBerry recently denied rumors that it had engaged in discussions with Samsung about being acquired by the South Korean conglomerate.)
“The company clearly in transition from being a former smartphone leader to now transforming a business to sell a select few or a select handful of smartphones to enterprise government customers,” Morningstar analyst Brian Colello said. “Typically the business model was the reverse — typically BlackBerry would give CIOs software for free to allow them to manage the handsets” they sell to customers.
Despite a few new hardware announcements, such as the BlackBerry Passport, a touch-screen smartphone with a keyboard released in September or the BlackBerry Classic, an update to the iconic phone with more screen space — “it’s clear BlackBerry is not going to re-emerge as a phone that has 20, 25 percent of market share of the entire smartphone space,” Colello said.
Instead, he said, BlackBerry’s strategy has been to “retain the most loyal users they have” — making it easier for employees and companies to access the platform, even if they’ve moved on to newer devices.
Beard is not ready to give up that easy: The focus on software and services could generate more interest in hardware, he insists.
“It has a halo effect on the BlackBerry side,” he said. “As more people download the software, they buy more handsets.”