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BlackBerry to launch two Android phones, admits Priv was too expensive

BlackBerry is planning to launch two mid-range Android devices this year in what analysts are calling the "last opportunity" for the firm to get it right in handsets.

This comes after the company admitted that the Priv, its first phone running Google's mobile operating system, was too expensive. In an interview with Abu Dhabi-based publication The National, BlackBerry chief executive John Chen said there would be one Android handset this year with a keyboard and one full touchscreen, but gave no timing on when they would be released.

Last year, BlackBerry launched its first device running Android called the Priv. It was aimed at the high-end market where the likes of Apple and Samsung play. But Chen said that it was too expensive.

"The fact that we came out with a high-end phone (as our first Android device) was probably not as wise as it should have been," Chen said.

"A lot of enterprise customers have said to us, 'I want to buy your phone but $700 is a little too steep for me. I'm more interested in a $400 device'."

Losing edge

But the company faces an uphill battle against the backdrop of a slowing smartphone market and intense competition in the mid-range space, especially as it has lost many of its key differentiating features it once had.

"While the BlackBerry brand is still strong and the value propositions usually have been centered around the best QWERTY keyboard, BlackBerry Messenger and secure platform, however, the conversation has changed," Neil Shah, analyst at Counterpoint Research, told CNBC by email.

"Touchscreen has completely replaced the physical keyboard and is much better with predictive analytics capabilities. Barring Indonesia, BBM has been taken over by Whatsapp and other clones."

Focus on profits

Michael Nagle | Bloomberg | Getty Images

BlackBerry has struggled in recent times to make its hardware business profitable. In its fiscal year ending February 29, BlackBerry reported a 39.8 percent year-on-year drop in hardware revenue. It said it recognized revenue related to approximately 3.2 million BlackBerry handheld devices in fiscal 2016, a large drop from the 7 million the previous fiscal year.

Chen has previously said that 3 million device sales a year at an average price of $300 would get the hardware division to breakeven. As part of this plan, Chen told The National that there would be no devices for the forseeable future running its own proprietary BB10 operating system.

"I don't think it's any surprise that BlackBerry is not planning any BB10 OS devices because to be profitable making your own OS (operating system) and devices you need to be shipping at a much greater number of units to cover the development of the OS and everything that goes with it," Ian Fogg, head of mobile at IHS, told CNBC.

"By switching to Android, BlackBerry should be able to be profitable at much lower shipment volumes in the device business."

But moving to Android has its own problems including how to best secure the operating system since it's not entirely in BlackBerry's control because it's owned by Google, Fogg added.

Even if BlackBerry manages to make a compelling and secure device, players from Samsung and Apple to niche firms like Blackphone, have all been pushing privacy as a key feature of their handsets.

'Last opportunity'

The latest comments by Chen show BlackBerry is sticking to hardware for now. Moving to Android has also been a result of developers withdrawing their support for BB10 OS. Facebook and WhatsApp said last month that they would drop support for their BB10 OS apps.

BlackBerry's big focus has been on software recently which has shown strong results. In September, Chen told CNBC that he would need one year to make the device unit profitable, and if not, consider ditching it.

"If by September, I couldn't find a way to get there, then I need to seriously consider being a software company only," Chen said in a CNBC TV interview last September.

Analysts said that this is the last chance for BlackBerry to get it right in hardware.

"I think this is the last opportunity for BlackBerry to toy with hardware business, ideally, I believe it should focus on its software and services assets to pivot away from hardware and license its solutions to other Android vendors or service providers," Shah said.