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Bloomberg
BlackBerry CEO John Chen said the company will become less reliant on smartphones by focusing on software.

BlackBerry puts focus on software

– BlackBerry’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 Wednesday 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.

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, including lcoal 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 Wednesday 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.

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