BlackBerry Ltd’s ‘New Coke’ moment: John Chen hones in on company’s old, but beloved, tech recipe

BlackBerry Ltd’s ‘New Coke’ moment: John Chen hones in on company’s old, but beloved, tech recipe

Matt Hartley | March 28, 2014 7:10 PM ET

WATERLOO, ONT. • John Chen is navigating something of a “New Coke” moment.

When BlackBerry Ltd.’s previous management team unveiled the BlackBerry 10 operating system in January of last year alongside a pair of new, redesigned smartphones, it represented a monumental shift for the Waterloo, Ont.-based company.

Unfortunately, many of BlackBerry’s most loyal customers — especially those inside governments and large corporations — weren’t thrilled with the new technology recipe.

Some didn’t like the design of new smartphones — which removed the ‘belt’ of phone buttons and trackpad from keyboard devices — while companies that wanted to use BlackBerry 10 handsets were forced to adopt new server technologies to manage the new devices.

More work needs to be done, but we’re on the right path

Now, just as The Coca-Cola Co. was once famously forced to abandon its strategy of altering the recipe of its flagship soft drink, BlackBerry’s chief executive is reaching into his company’s recent past, resurrecting old, but beloved, devices and features in an effort to get the once dominant mobile pioneer back on track.

“More work needs to be done, but we’re on the right path,” Mr. Chen said in an interview with a handful of reporters at the company’s Waterloo headquarters on Friday.

Mr. Chen’s comments came on the same day the company posted fourth-quarter revenue of US$976-million, a 64% decline over the same quarter last year and the first time the company has reported quarterly revenue below US$1-billion since 2007.

However, BlackBerry’s adjusted loss was US$42-million, or 8¢ per share diluted, which was better than the roughly 57¢ shortfall which had been expected by analysts, according to Bloomberg. The shares rose more than 7% in New York on Friday before closing down roughly 7% as analysts digested the results.

Since taking command of BlackBerry in November, Mr. Chen has moved quickly to jumpstart BlackBerry’s turnaround by focusing heavily on courting the company’s core business user base.

After getting input from many customers, Mr. Chen said later this year the company will launch a new flagship keyboard device known as the BlackBerry Classic, which will incorporate some of the more popular elements of BlackBerry’s older BB7 software, as well as the belt and trackpad.

At the same time, BlackBerry will launch a new version of its BlackBerry Enterprise Service (BES) technology, known as BES 12, which will enable companies to manage older BlackBerrys running the BB7 software, as well as new BlackBerrys running on BB10 — something previous versions of the technology could not do — in addition to rival devices running software from Apple Inc., Google Inc. and Microsoft Corp.

“The strategy is to make sure that the new technology also bridges back to the old,” Mr. Chen said.

“The whole strategy of the BES 12 relies on the fact that the old install base, the current users, they continue to stay with us, and a lot of them like the new idea of the Classic — the interface, the belt, and the new BB10 technology in terms of multimedia and web browsing — so there’s a certain level of excitement around that we were able to combine all the servers into one.

“I just have to be able to supply to the install base enough products so that they will wait until [BES 12] comes out so that they can get on the [BES 12].”

Although Mr. Chen said the hardware for the BlackBerry Classic is already “quite ready,” its software and the BES 12 technology would likely not be available until November.

“Every customer I spoke to, to lay out this plan, they all said it makes perfect sense,” Mr. Chen said.

“I’ll be the first one to say that some will wait, some will not. I wouldn’t be dumb enough to think that everybody will wait. But there will be more waiting today than when there was no such plan.”

To help meet the needs of those enterprise customers who aren’t interested in migrating to the existing BB10 handsets before the launch of the Classic, Mr. Chen revealed that BlackBerry plans to begin a new production run of its popular BlackBerry Bold device, which runs on the BlackBerry 7 OS.

BlackBerry devices running on the legacy BB7 operating system are currently outselling the company’s latest BB10 software, which powers the touchscreen Z10 and Z30, as well as QWERTY-enabled Q5 and Q10 devices launched last year.

I’ll be the first one to say that some will wait, some will not. I wouldn’t be dumb enough to think that everybody will wait

Approximately 2.3 million of the 3.4 million BlackBerry smartphones that were sold through to end users in the quarter were running on the company’s older BlackBerry 7 software.

Still, Mr. Chen said BlackBerry watchers shouldn’t expect these changes to have an immediate impact on the company’s revenue totals, which the company says are likely to drop again next quarter.

“I realize that the people would love for me to say that we lost a lot less money than everybody expected and then somehow mysteriously, miraculously, the revenue is going to swing around,” Mr. Chen said.

“The fundamentals are still the same. It took many years unfortunately to get us to this point, and we’re doing everything we possibly can to turn that direction around, but there is no doubt in my mind that the revenue will come.”