BlackBerry pins hopes on an Android phone, Priv, as handset losses continue

BlackBerry is moving away from its proprietary operating system and embracing Android as it seeks to turn around its loss-making handset business

It's official: BlackBerry's next phone will run Android.

The phone, called Priv, will also include BlackBerry security and productivity tools, Chairman and CEO John Chen told investors early Friday.

The move suggests that Chen still can't decide whether BlackBerry should focus on the more profitable enterprise mobile device and application management software sector, or remain a loss-making phone maker with one foot still in the cut-throat consumer electronics market.

On Friday, BlackBerry reported revenue of US$490 million for the three months to Aug. 29, down from $916 million a year earlier. The company scraped up a net income of $51 million with an accounting manipulation, revaluing debentures to the tune of $228 million. Gross margin was down, however, while fixed selling costs remained largely unchanged from a year earlier.

Software licensing revenue jumped 33 percent, however, suggesting that BlackBerry's mobile device and application management business, supplemented after the quarter ended with the $425-million acquisition of Good Technology, is on the up.

The company added 2,400 enterprise software licensees during the quarter, but 60 percent of these were cross-platform licenses, meaning that BlackBerry's software will be used to manage the security of phones from other vendors.

Sales of its own phones dropped precipitously: It recognized revenue from shipment of just 800,000 phones running BlackBerry OS in the quarter, down from 2.1 million a year earlier.

This -- and the slow take-up of devices running Windows Phone -- suggests that phone buyers have lost their appetite for minority operating systems. A move to selling Android phones makes increasing sense.

BlackBerry has flirted with Android before, turning to the Google-backed OS to boost the limited range of apps in the online store for its own operating system. It rolled an Android compatiblity layer into BlackBerry OS 10, and then invited Android app developers to submit their apps for testing. That didn't exactly release a flood of apps, so it eventually turned to Amazon.com to deliver apps to devices running the BlackBerry 10 OS, as Amazon already had a well-stocked Android app store of its own to supply users of its ill-fated Fire phone. Whether sales of Fire tablets will be sufficient to sustain that store now that Amazon appears to have stopped production of the Fire phone remains to be seen.

As for BlackBerry's new phone, the Priv will be a slider device with enterprise security features. The company expects it to go on sale by year-end.

Fans of the BlackBerry operating system can look forward to a minor update, to version 10.3.3, next March -- but the company stopped short of announcing any new phones running the OS.

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