BlackBerry shrivels - but confirms Android 'privacy' device

The smart device manufacturer is in financial free fall - but could Android reverse the decline?

Smart device manufacturer BlackBerry has reported worse second-quarter results than expected, with revenues of $490m against consensus estimates of $611m, with forecasts of modest sequential growth for the rest of fiscal 2016. Profit margins are also falling.

The results are significant for three reasons.

First, because analyst forecasts of $611m represented Wall Street's predictions of BlackBerry’s spiralling fortunes finally hitting rock bottom, and the company has missed those estimates by over $120m.

Second, because the company’s falling share price – in the wake of its tumbling financials – makes it harder to continue on the acquisition trail. Earlier this month, BlackBerry agreed to buy rival mobile software maker Good Technology for $425m, in a bid to bolster its services business, where revenues are also falling short of expectations: $210m vs an anticipated $227m.

And third, because BlackBerry’s quest to restore its once robust position in business communications, in particular, relies on the health of its software business, which saw second-quarter revenues of just $74m against analyst consensus of $100m. Again, the company is missing analysts’ worst estimates by a significant margin.

Private communications: the future?

However, the bitter financial cocktail comes with a twist of fresh juice: BlackBerry today confirmed the launch of its first Android-based smartphone, due at the end of 2015. Currently known as ‘Priv’, the device will focus on private communications.

BlackBerry CEO John Chen said: "Priv will be the solution for smartphone users who are learning daily of the lack of privacy they have on their current devices." (But not Android devices?)

Priv will enter the market at an interesting time, particularly in the UK. Here, MI5 chief Andrew Parker has claimed that end-to-end-encrypted messaging services pose a treat to national security, while the so-called Snooper’s Charter will be re-introduced to Parliament in a few weeks’ time.

The interests of technology companies and their business customers would appear to be increasingly at odds with those of the UK government and its security services, and providers’ ability to innovate is stymied only by their ability to retain talent and spend big money.

In BlackBerry’s case, it has recently claimed to own some 44,000 patents – analyst consensus had long been in the region of 5,000, making this a rare occasion when the company has beaten analyst forecasts. The company is now on a concerted quest to turn those ideas into money. Fast.

• BlackBerry has said that it remains committed to the development of its own BlackBerry 10.