UPDATE 5-BlackBerry avoids smartphone risk with outsource move -CEO

Wed Sep 28, 2016 3:26pm EDT
 
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(Recasts with CEO comments)

By Alastair Sharp

WATERLOO, Ontario, Sept 28 (Reuters) - BlackBerry Ltd's decision to outsource the development of its smartphones helps it avoid the risks of a competitive market and focus on its more lucrative businesses of software and managing rival devices, its chief executive said on Wednesday.

The company's shares rose 5 percent as investors welcomed a further shift away the money-losing handset business, in which BlackBerry had gone from being a market leader to trailing far behind rivals like Apple Inc.

In a model for how it plans to keep BlackBerry-branded handsets in the market, the company said it had signed a deal with Indonesia's BB Merah Putih to manufacture, distribute and promote new devices in that country, its largest handset market.

BlackBerry said it was in late-stage discussions for a similar deal in China and working on several India initiatives.

"What we did was cut off the entire chain, and I'll take a royalty," Chen told reporters, noting it could now avoid inventory and supply chain costs. "I'm still in the handset business, but I'm in it in a profitable way."

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.   Continued...