BlackBerry Chief Executive John Chen speaks during the official launch of the Passport smartphone in Toronto, September 24, 2014.Aaron Harris/Reuters
Confirming its transformation from a smartphone-maker to a mobile software provider, BlackBerry Ltd. is teaming up with a company that, just a few months ago, was among its fiercest rivals.
At a media event in San Francisco on Thursday, BlackBerry announced it is partnering with Samsung Electronics Co. to bring its security standards to the handset maker's smartphones. The deal was among an onslaught of new announcements all focused on the company's goal of becoming the leading provider of smartphone management services, be those smartphones BlackBerrys, iPhones, Android devices or anything else.
"Today is a very serious day for me," said BlackBerry CEO John Chen, who is celebrating his first anniversary as head of the company. "We're not about phones this time – we're about software."
Shares of the Waterloo, Ont.-based company rose on the news, closing 7-per-cent higher on Thursday.
The Samsung announcement marks a sharp change of direction for BlackBerry, which only a few years ago was still trying desperately to claw back market share from Samsung in the consumer smartphone space.
Executives at both companies brought up the idea of a partnership only a few months ago, during a meeting at the Mobile World Congress trade show in Barcelona.
"We were like awkward teenagers at the school dance," said John Sims, BlackBerry's president of global enterprise services.
Indeed, the two companies had been direct competitors for years, as Samsung joined the ranks of manufacturers luring traditional BlackBerry users away from the once-dominant smartphone giant.
"I don't know whether I want to wish Samsung success or not," said Mr. Chen. "I'm a little conflicted."
For Samsung, the partnership gives the company access to BlackBerry's security infrastructure – and its reputation as the strongest of the major smartphone manufacturers. For BlackBerry, it opens up a huge and previously inaccessible new market.
"It allows BlackBerry to put its security solution with the handsets of the biggest Android phone manufacturer on the planet," said technology analyst Carmi Levy. "They're swimming in the ocean now."
Like the Samsung partnership, a number of new BlackBerry announcements on Thursday focused squarely on enterprise security. A new service called Enterprise Identity allows IT departments to manage secure access to internal software and cloud-based services using a single piece of software.
In addition, the company also showed off a new meeting-organization tool based on the BlackBerry Messenger app.
But the new product most vital to the company's continued survival is the mobility management service known as BlackBerry Enterprise Server 12 (BES 12). The service allows corporate IT departments to manage all manner of smartphones, including iPhones, Windows Phones and phones running on Google's Android operating system.
Mr. Chen's ability to achieve his previously stated goal to return BlackBerry to profitablity in 2015 will largely depend on how many enterprises are willing to make BES 12 their primary mobile management tool.
Since his appointment one year ago, Mr. Chen has expended considerable energy trying to convince businesses of the benefits of BlackBerry's enterprise software. This summer, the CEO sent his employees a memo saying the company's restructuring process – which had seen BlackBerry undergo several rounds of painful layoffs – was officially over. His claim has so far been bolstered by quarterly earnings that, while not spectacular, are a substantial improvement over the staggering losses the company had posted in recent years.
BlackBerry's biggest corporate challenge is its declining service access fees – the per-user fees it charges carriers to access its network infrastructure. For years, access fees made up one of the most profitable slices of the BlackBerry corporate pie. But as fewer and fewer customers opt to purchase BlackBerry smartphones, and carriers have become less willing to pay, service-fee revenue has plummeted.
Mr. Chen admits the fees are probably never going to return to previous levels. As such, the company is trying to offset the loss with two major new revenue sources – software sales and monetization of the BlackBerry Messenger software.
In software, the company is offering a bevy of new tools and services, including security and phone management products. With BBM, BlackBerry hopes to make money by running ads on the service and equipping it with payment technology for use as a digital wallet.
BlackBerry expects to make about $500-million from software in the coming fiscal year, and about $100-million from BBM. But even if those estimates prove correct, they won't fully offset the $800-million that the company expects to lose in service access fees during the same period.