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BlackBerry will stop designing its own phones and focus on software

The company says it will rely on partners for any hardware efforts.

Asa Mathat

BlackBerry said Wednesday that it will stop internal development of smartphones, relying on partners for any future hardware efforts.

The move comes as the company has struggled to turn around its phone business.

“The company plans to end all internal hardware development and will outsource that function to partners,” CEO John Chen said in a statement. “This allows us to reduce capital requirements and enhance return on invested capital.”

BlackBerry has been setting the stage for such a move for a while now. It has already released one phone, the DTEK50, that was essentially a rebadged Alcatel phone and has started offering up pieces of its phone software for use on other Android devices.

Chen had said BlackBerry would exit the phone business if it could not make it profitable.

The company on Wednesday reported a net loss of $372 million, or 71 cents per share, on revenue of $334 million. Excluding certain items, the company said it essentially broke even, on adjusted revenue of $352 million.

That was five cents per share better than expected, but revenue was short of the $393.75 million consensus estimate.

“We are reaching an inflection point with our strategy. Our financial foundation is strong, and our pivot to software is taking hold,” Chen said. “In Q2, we more than doubled our software revenue year over year and delivered the highest gross margin in the company’s history.”

The company also said its CFO, James Yersh, was leaving the company for personal reasons. He is being replaced by Steven Capelli, a longtime executive at Sybase, Chen’s last company.

BlackBerry said that it expects full-year fiscal year earnings excluding items to be between breakeven and a 5-cent-per-share loss, better than consensus estimates of a 15-cent-per-share loss. It said it continues to expect 30 percent revenue growth in its software and services business for the fiscal year.

Shares of the company traded up on the news. The stock was recently at $8.35 in pre-market trading, up 47 cents, or nearly 6 percent.

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