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Can Foxconn Partnership Save BlackBerry?

Can Foxconn Partnership Save BlackBerry?
December 20, 2013 12:44PM

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Beleaguered Canadian handset maker BlackBerry has inked a deal with iPhone maker Foxconn, under which the Taiwanese company will develop BlackBerry phones. Foxconn will also manage BlackBerry's inventory, using the experience it has acquired shipping the world's most successful smartphone for Apple.

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Struggling with a huge decline in revenue, Canadian smartphone pioneer BlackBerry on Friday announced a strategic partnership with Hon Hai Precision Industry Co., better known as Foxconn Technology. Foxconn, which claims to be the world's largest maker of electronics and components, is best known for manufacturing Apple's iPhones and iPads.

The five-year agreement between BlackBerry and Taiwan-based Foxconn calls for the manufacturer to make some of BlackBerry's upcoming devices and manage inventory, using its experience shipping the world's most successful smartphone for Apple. The devices will be made at facilities in Indonesia and Mexico, not China.

Commitment To The Market

In an earnings call discussing the company's $4.4 billion loss for the third quarter and $380 million decline in revenue, BlackBerry's new CEO said the first device to emerge from Foxconn's factories will be a 3G phone based on BlackBerry 10 that will launch first in Indonesia, according to reports.

"This partnership demonstrates BlackBerry's commitment to the device market for the long-term and our determination to [be] the innovation leader in secure end-to-end mobile solutions," said John Chen in a statement.

"Partnering with Foxconn allows BlackBerry to focus on what we do best -- iconic design, world-class security, software development and enterprise mobility management," he added.

Amid continuing chatter that BlackBerry, or at least its smartphone business may be for sale, the deal suggests the company, which was the first to mass market a cell phone that reads and sends messages, is in it for the long haul.

"Blackberry entering in partnership with Foxconn depicts that the Canadian brand still wants to focus on making hardware in longer-term," analyst Neil Shah of Counterpoint Research told us in reaction to the news.

"This also signals BlackBerry to leverage Foxconn's expertise in manufacturing touch-enabled smartphones, which BlackBerry has been weak at," he said. "This should help BlackBerry focus on key Asian markets with a full touch portfolio."

Shah noted that current shipments per quarter amount to fewer than 2 million units whereas Foxconn's factories -- where worker conditions have been under international scrutiny -- have the capacity to produce that many in a day. "So Foxconn should be able to easily manage BlackBerry and Apple supply" at the same time, he said.

While sales fell 56 percent in the quarter year-over-year as the aging contender struggled against sparkling new Android, iOS and Windows-based competitors, the good news is that it maintains an edge in business messaging.

Messaging Growing

On Thursday the company announced that its mobile messaging platform, BBM, is used by more than 85 percent of BlackBerry Enterprise Server-enabled organizations running BlackBerry smartphones. In its earnings report Blackerry said it has seen over 40 million newly registered iOS/Android messaging users in the last 60 days while more than a dozen Android OEMs preload BBM, including most recently LG.

"We are pleased to be working with BlackBerry as it positions itself for future growth and we look forward to a successful strategic partnership," said Terry Gou, Founder and Chairman of Foxconn.

Tell Us What You Think
Comment:

Name:

Saket Ghiria:

Posted: 2013-12-22 @ 9:58am PT
How quickly a giant like Blackberry now struggling to survive shows change is inevitable and keeping pace with it is essential.

Helmut S. Lenko:

Posted: 2013-12-21 @ 10:05pm PT
Great partnership: do what you're good at....
I'm going to buy some of their stock, now that things are
on the rebound: there is a plan in place, that should work!



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