Despite Loss, BlackBerry Has Some Hope for Future

OTTAWA - Although John S. Chen is relatively new to the roles of executive chairman and chief executive of BlackBerry, the Canadian smartphone maker, on Friday he presided over what has become almost a ritual for the company when he announced a fourth-quarter net loss of $423 million, bringing the total loss for the company's fiscal year to $5.9 billion.

Despite BlackBerry's relentlessly bad financial news, however, industry and financial analysts are no longer raising concerns that the once-dominant company is rapidly heading toward collapse.

Since moving to BlackBerry in November, Mr. Chen has revamped its executive ranks, accelerated the layoffs of employees, farmed out some phone development, cut costs and sold real estate.

But more significant is Mr. Chen's plan to turn the company's focus away from handsets and toward its traditionally smaller software and services business. This, many analysts anticipate, might finally remove the association of the word 'troubled' with BlackBerry's name. That is because the plan focuses on a market that BlackBerry effectively invented, even though it includes trying to revitalize the once-popular BlackBerry Messenger instant messaging service and still selling phones.

BlackBerry, in Mr. Chen's version of the future, will become a leading supplier of software and services to manage the proliferation of smartphones and tablets used by business and government workers to handle secret data as well as the systems that will safeguard that data.

He is not the only one to see the potential in that business. IBM, Citrix, VMware and Oracle, among others, recently acquired companies in that field. And while he was at SAP, Mr. Chen himself developed similar software products.

But BlackBerry's head start in that business, Mr. Chen said in an interview on Tuesday, combined with other changes at the company, present a significant opportunity.

'We were once a $20 billion company,' Mr. Chen said. 'It's not out of the question that we could go back and recapture old ground. That may sound a little funny to you right now, but you never know.'

Friday's results illustrated how far BlackBerry has to go before it reaches those heights again. The company said that its quarterly revenue fell to $976 million, a 64 percent drop compared with the same period a year earlier. In what was supposed to be a make-or-break year for the company, annual revenue declined 38 percent to $6.8 billion. The net loss for the year was $5.9 billion or $11.18 a share compared with a loss of $628 million a year before.

Mr. Chen's plan is, as he implied, a kind of return to the company's roots. BlackBerry's early success arguably came from software and services that were invisible to users but of great interest to corporate and government information technology departments.

When email security was a cause of constant corporate fretting, BlackBerry allayed concerns about less secure mobile email with its global network for securely moving messages. Along with that came BlackBerry Enterprise Server software, which allowed companies and governments to limit what employees could do with their BlackBerrys, to spy on how the phones were being used and, if necessary, to shut down phones by remote control.

The system was costly; users paid monthly fees for every BlackBerry, as well as hefty service and support fees. But it was so secure that it was sometimes a source of tension between BlackBerry and governments looking to monitor their citizens' communications.

Until last year, BlackBerry's software was useless for the iPhones and phones using Google's Android software that were swiftly dislodging BlackBerry handsets in the workplace. The resulting void was filled by a variety of relatively small, privately held companies like Good Technology, SOTI, MobileIron and AirWatch, which was acquired last month by VMware, a leading corporate software maker, for $1.81 billion.

The newcomers were also quicker than BlackBerry to develop software that addressed smartphone activities beyond email and web browsing.

BlackBerry recently updated its management software to include additional features for Apple and Android phones, and also to support Windows Phone. At the same time, many large corporations still operate BlackBerry Enterprise Servers to support the dwindling number of BlackBerrys used by their employees.

'There's a huge, huge opportunity,' Mr. Chen said. 'I'm going to have a lot to build on for a long time.'

While BlackBerry's latest software, BlackBerry Enterprise Server 12, still lacks some iPhone and Android features, Jack Gold, the principal analyst at J. Gold Associates, said it was nevertheless competitive.

'It's good,' Mr. Gold said. 'Is it the best? It's hard to say.'

One of the biggest challenges for BlackBerry is its image - that of a slow-footed company bleeding cash. Persuading corporations that its software is a safe investment will be a tough job for Mr. Chen.

'It's perhaps the most defining challenge he faces in turning this company around,' said John Jackson, a mobile data analyst at the research company IDC. 'There is a need for him to strongly articulate why BlackBerry matters.'

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