If there is anything we've learned about John Chen in the 18 months since his joining BlackBerry as CEO, it's that he has a plan, and it's a plan he's sticking to it. Granted, not everyone might agree with that plan or believe that it will turn out in his favor, but it's a plan nonetheless. A new interview with Maria Bartiromo appearing on USA Today sees BlackBerry CEO John Chen lay out the details of that plan once again while discussing the topics of privacy, security, BlackBerry's hardware business and more.
We're going to stay focused on executing; the strategy has not changed.
Q: You've been running Blackberry now for 18 months. How are things progressing?
A: I've been doing a bunch of things, investing in the future. And my No. 1 priority is to make money and generate cash, and then invest that cash. Over the last 18 months there's a lot of proof of that. The last two-quarters in a row, we made money and generated cash. The trend is in the right direction. We acquired three companies, all aligned with the strategy of us being the leader in security and privacy, and focusing on enterprise computing and the power users — the people in the professional world and governments.
We also made a minority investment in a small company that provides software for medical usage — clinical trial usages. So we're pretty much aligned to what I set out to do. The journey is about halfway through. We're going to stay focused on executing; the strategy has not changed. The vision that I set out to do is to get ourselves very focused on enterprise, on professional users, and on security and privacy protections. The medical verticals, governments, financial, regulated industries such as gas and energy, the legal industry.
The hardware also will contribute to the security part of the equation
Q: If you look at the business over the next 10 years, how much will be security and privacy, and how much making smartphones?
A: I don't think you can separate the two, and 10 years seems to be an awful long time. I would say the difference between the hardware and software business is probably more like 80/20 right now. In the next year or two I'd like to get to 50/50 or 60/40 so that we build a pretty robust software business. And the other software business is based on security almost entirely. The differentiation is it will come from security, and the area we talk about (with that) is the medical field. The hardware also will contribute to the security part of the equation. But the handset business is going to be very much focused on professionals using the device.
We won't try to do everything and we will focus on priorities.
Q: What will it take for you to sustain earnings growth?
A: First, cut costs in the hardware business. I believe we can do that with some level of collaboration or partnership. Not doing everything myself is important. So we'll be able to focus on really great design and security and privacy. We won't try to do everything and we will focus on priorities. We have a good set of plans and designs to do it. We have a couple of very exciting devices that are going to come out towards the end of this calendar year. So things are clicking there.
The one big area we were sliding was in the service area. In the old BlackBerry devices, every user gives us through their phone bill a few dollars every month — something of a service-activation fee. My biggest challenge is that number's now going down. Whether somebody took the old phone and replaced it with a new BlackBerry phone, or somebody takes an old BlackBerry phone and moves to one of my competitor's phone, that number is continuing to decline. Unfortunately, it's the highest margin business of ours.
So while I'm shifting that business, the question becomes, "How do I cover that?" The way to cover it is to really focus on growing our software business and our messaging business, because they carry the same margin profile. And of course, the software business is also the easiest for us to amplify our advantage in security and privacy. It's very important to our business case. Those two in combination will allow us to not only get the margins and therefore earnings to improve, but also we'll get closer to the overall strategy to generate more cash, and invest our cash in a thoughtful way.
Reading through the full interview, it almost feels like Chen is beating down some of the latest layoff news and takeover rumors that have been making headlines this past week but there's no telling when exactly that this interview was hosted, just that it was published today. In any case, it covers some key points for BlackBerry and lays out the plan Chen has for BlackBerry. Partnerships that help reduce hardware costs for BlackBerry, key acquisitions, extreme focus enterprise, on professional users, and on security and privacy protections and investing in building a robust software business, plus the release of targeted and specific devices. If you've not read the full interview yet, be sure to check it out.