BlackBerry CEO gives himself two years to reduce firm's reliance on devices

John Chen, chief executive officer of BlackBerry Ltd. since November, is stepping up BlackBerry’s reliance on business customers instead of the smartphones that made the company famous.

BlackBerry Ltd.’s John Chen is giving himself two years to overhaul the smartphone maker and offset declining handset demand with sales of software that connects computers with all manner of machines, from cars to heart monitors.

Chen, who took over as chief executive officer in November, is stepping up BlackBerry’s reliance on business customers instead of the smartphones that made the company famous. In the worst-case scenario in which he misses his goal of generating cash flow by this fiscal year, Chen said he’ll have six to eight quarters to replace declining hardware sales with higher-margin software revenue.

“I don’t have a plan to get rid of handsets, I have a plan to not be dependent on handsets,” Chen said yesterday in an interview at Bloomberg’s headquarters in New York. “All I need to do is replace the handset revenue, and this company will be very different.”

The shift is the key to Chen’s goal of returning the money- losing company to profit by the fiscal year that ends in March 2016. Chen is in a race against time with device sales continuing to slide — 77 percent last quarter alone from a year earlier. His plan to create fresh revenue streams from its QNX software and BBM instant-messaging services has been welcomed by investors who’ve driven the stock up 23 percent since he took the helm after a failed sale process.

QNX Purchase

BlackBerry bought QNX in 2010 for $200 million from Harman International Industries Ltd. and set about building a new smartphone operating system, BlackBerry 10, on the software. It’s already widely used in cars and industrial settings like coal mines and hospitals. Now Chen wants to make it more prevalent anywhere machines need to communicate with other machines.

“This is where the industry is going,” Chen said. “It’s all about device interaction. This is why it’s so important to be agnostic.”

Chen said that by replacing single-digit phone margins with software margins that are routinely 70 percent to 90 percent, BlackBerry can be profitable with the same level of revenue. Chen reiterated yesterday that he expects the Waterloo, Ontario- based company to stop losing cash by the end of this fiscal year.

The company is focused on supplying both software and hardware to customers in regulated industries such as finance, government, health care and law who need security, risk management and high productivity, Chen said. About 80 percent of BlackBerry’s installed base of smartphone customers are in a regulated industry, and an even higher percentage of customers dependent on its servers are in such a field, he said.

Restoring Value

Emphasizing this core base of users and technology that caters to them “will be the best way to capture and reverse the decline of our value,” he said.

Chen took over after a plan to sell BlackBerry and take it private had collapsed. He said that he’s focused on making BlackBerry competitive again, not selling the company at a distressed price.

“I’m not running the company for a sale,” Chen said. “I’m running the company to generate value, to grow the business.’

He pointed out that he ran Pyramid Technology Corp. for five years before he sold it and Sybase Inc. for 12 years before SAP AG bought it for $5.8 billion in 2010.

Today, BlackBerry shares fell less than 1 percent to $7.93 at 10:13 a.m. in New York, giving the company a market value of $4.2 billion.

Chen inherited a company that had already been losing smartphone market share to Apple Inc. and Samsung Electronics Co. for years. As recently as late 2010, BlackBerry claimed 19 percent of the global smartphone market, according to IDC. By December of last year, it had slipped to 0.6 percent.

T-Mobile Fallout

As the company shifts its emphasis to supplying software and services, Chen recently decided to end BlackBerry’s partnership with T-Mobile US Inc.

In February, T-Mobile started offering to swap new iPhones for old BlackBerrys. Last week, Chen said he won’t renew the supply agreement with T-Mobile, the fourth-largest U.S. wireless carrier, saying that their strategies are ‘‘not complementary.”

“What kind of business person am I when I knowingly am giving a license for a company to move my customers away?” Chen said yesterday in the interview.

Severing ties with BlackBerry critics, cementing loyalties with other carriers and bringing back the older and popular BlackBerry Bold phone have been among the latest steps in Chen’s efforts to restore faith in the company.

No Pushing

“It was easier to do this with T-Mobile,” he said. “They are clearly focused on consumers, and I’m clearly focused on enterprise. So this is a different conversation if it was AT&T or Verizon.”

In recent weeks, BlackBerry also has taken legal action to try to stamp out product leaks and just won a court order convincing a judge that Typo Products LLC probably infringed its patents with its clip-on keyboard.

The move to cut ties with T-Mobile wasn’t emotional, he said. It was to send a signal.

“I wanted to make sure the world knows that we are not going to let people push us around,” Chen said.

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Cable TV: The Monopoly That Keeps On Taking

Everything eventually will flow through your Internet connection. That's why we need more fiber optic competition.

Wake up any tech CEO in the middle of the night and ask what his or her fondest wish would be, and the answer would be "a monopoly." For the longest time, IBM, Microsoft, Intel, Oracle, and Cisco had near monopolies, and their CEOs slept well at night. The greatest advantage: You can make mistakes, be late to market, have quality problems, and still own your market.

For the longest time, no one had a monopoly as strong as either the telephone industry's or the cable television industry's, so it's been with a little humor that I've watched Comcast's bid for Time Warner Cable.

The cable industry has never really had competition. Once the franchises were let by US cities and towns, each of their owners would trade properties like so many baseball cards, often to build systems contiguous to each other to keep costs down. Because they didn't really compete with each other, they could raise prices pretty much as they chose. DirecTV was seen as Darth Vader, but otherwise they had little to worry about.

[Why isn't everyone already using alternative apps for voice calls? Read Is Mobile VoIP A Telco Killer? ]

What's your cable bill this month -- $120? More? I have foolishly let Comcast sell me cable, Internet, and telephone service, and my monthly bill is higher than the GNP of France. It's hard to believe that in the industry's early days, cable TV was more like $7 a month… and maybe another $7 for HBO. Cable providers never really understood the Internet and had to be dragged, kicking and screaming, into this new revenue source. But once there, they got it.

Sheer dumb luckOne of the advantages of teaching at MIT is that I'm never worried about being the brightest kid in the classroom. In fact, when I walk out of a classroom, the average IQ there increases. What my very smart students do today, the rest of us will do tomorrow.

My students cut their landlines five years ago and 100% of them use Skype. If they want any programming, it's House of Cards on Netflix, but they want all the episodes at once. Why wait? What happens when the rest of America, the homeowners, start to cut their cables just as they have already cut their landlines? What happens when Netflix is clogging up the Internet at night, rivaling even YouTube in the amount of one-way video it sends down the pipe? Here's where things get interesting.

By sheer dumb luck, the cable guys have lapped both cellular carriers and telephone carriers. The future belongs to high-speed fiber, and the cable guys are there first. I live in Boston, and Verizon has been talking up fiber for five years, but I'm still a third-world citizen as far as they're concerned. Their idea of high speed and mine are worlds apart. Just upgrading its network to a minimally acceptable level is costing Verizon $13 billion, and it still will be far behind. No, if I want high-speed fiber, it's going to have to be Comcast. Or is it? Is there another alternative?

Comcast already has swallowed NBC Universal and a gaggle of cable companies. It owns both the customer and the content. Now, if the Time Warner deal goes through, Comcast will sit on not only 33 million households, but also the right households, in the right areas, all coveted by the biggest advertisers.

Comcast got started when Ralph Roberts, its founder, allegedly won his first cable franchise in a poker game in Tupelo, Miss., in the early 1960s. He then decided that this was one great business. His son Brian has continued that thrust, buying other cable companies, buying content companies, and forcing other media companies to bow to Comcast's clout.

That clout isn't just in market size. Today, Comcast has real political clout, one advantage of being close to Washington. (Insert Philadelphia joke here -- I won't be offended.) Comcast has clout with the content it doesn't own. Imagine negotiating with ESPN or Fox -- having 33 million households makes you King Kong.

Furthermore, it can charge more for "expedited service," which is what it will be getting from Netflix under a recent deal. Although the courts have said that cable systems shouldn't penalize bandwidth hogs, the smart guys know that there are too many ways to game the system. If paying for expedited service gets Netflix faster downloads, it will do it.

I spent too many years telling the telephone companies how to get into cable and then telling the cable honchos how to get into telephony. The cable guys will have it both ways. If you choose to avoid their cable offerings and reject their bundled services, you can. But then you will pay up for expensive high-speed lines so you can access Netflix or HBO directly. "You can pay me now or you can pay me later -- but trust me, you're going to pay me."

Rock and a hard placeFCC chairman Tom Wheeler is an old friend of mine. He ran the National Cable Television Association in the early 1980s and later ran the Cellular Telecommunications & Internet Association for more than a decade. Now, in the big chair at the FCC, he's caught between a rock and a hard place. If he lets the Comcast-Time Warner deal go through, he'll be seen as the lap dog to the cable industry. Should he encourage other companies to enter the market? Google, which is already making noises, comes to mind, as does Facebook, or even a band of high-speed Internet entrepreneurs who could stitch together meaningful competition.

Bottom line: We need more competition in fiber, and that costs real dollars. About $1,000 per household. No single company, not even Google, can afford that build-out by itself. But I can see a number of regional players around major cities coming up with solutions.

Is broadband fiber a right or a privilege? I don't think it's a right. Some areas will not have fiber within your lifetime. But the major urban areas will, and the FCC must encourage new competition.

Engage with Oracle president Mark Hurd, NFL CIO Michelle McKenna-Doyle, General Motors CIO Randy Mott, Box founder Aaron Levie, UPMC CIO Dan Drawbaugh, GE Power CIO Jim Fowler, and other leaders of the Digital Business movement at the InformationWeek Conference and Elite 100 Awards Ceremony, to be held in conjunction with Interop in Las Vegas, March 31 to April 1, 2014. See the full agenda here.

Howard Anderson was the founder of The Yankee Group, a high-tech analysis firm which he ran from 1970 to 2000 and which was sold to a Fortune 500 company. He is also the co-founder of Battery Ventures, which has raised $4.5 billion and invested in more than 300 high-tech

News Source: www.informationweek.com

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Glencore to Study BHP Australian Nickel Assets, CEO Says

Glencore Xstrata Plc (GLEN), the global commodity trader and metals producer run by billionaire Ivan Glasenberg, said it will study the sale of BHP Billiton Ltd.’s Australian nickel assets.

“It’s on the market, it’s clear it’s on the market,” Glasenberg said today in a phone interview from London. “We will kick the tires. It’s something that would make sense, but it is an asset that’s had its problems.”

BHP has booked impairment charges on the Nickel West assets of almost $1.6 billion over the past two fiscal years, after prices for the metal declined. Glencore’s Minara unit controls the Murrin Murrin nickel mining and refining project.

“It’s something that would make sense with Minara being close by,” Glasenberg, who is chief executive officer of Baar, Switzerland-based Glencore, said today. “We do buy certain products from them.”

A spokeswoman for BHP in London declined to comment.

Glencore today announced a $454 million impairment charge on the Murrin Murrin assets in the north eastern Goldfields of Western Australia.

BHP’s Nickel West operations in Western Australia produced 103,300 metric tons of the metal in fiscal 2013. The assets include the Mount Keith open-cut nickel mine and concentrator, two underground mines and a concentrator at Leinster, nickel concentrate and smelting plants at Kalgoorlie and the Kwinana site, which produces nickel briquettes and powder.

Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director of Glencore Xstrata.

To contact the reporter on this story: Jesse Riseborough in London atjriseborough@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

News Source: www.bloomberg.com

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