The Motley Fool

BlackBerry Ltd. May Close its Hardware Division on September 28

Investors have been calling for a great turnaround for years, but still, BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) remains in a quagmire.

Its smartphones command less than 1% of the global market, and its software division, which is promising, is so small that it can hardly be compared to the BlackBerry of old. The average Wall Street analyst believes that the company will lose money this year, in 2017, and in 2018.

The biggest drain on earnings has been BlackBerry’s hardware segment—a failing business that is sucking up over 65% of BlackBerry’s research and development expenses. The handset division sold 500,000 phones last quarter, nearly 100,000 fewer than the quarter before. In the mid-2000s, the company was selling millions of phones every few months.

Investors have long known that by ditching a money-losing segment which is a significant drag on cash flows, BlackBerry could stage a turnaround in a matter of months, not years.

Last week, investors got some encouraging news.

Finally, an end to the madness

BlackBerry’s CEO John Chen also knows that hardware isn’t a long-term answer. “I personally do not believe devices are going to be the future of any company,” he said.

He has also previously said that he would make a decision in September about whether or not it made sense to stay in the smartphone business. A decision still hasn’t been made, but it’s September at last, and some cursory data suggests that hardware is winding down.

Curiously, BlackBerry just began a large sale on its own site (40% off all accessories). The sale is spread across all products, including cases, batteries, chargers, audio items, etc. The sale ends on September 27, which just happens to be the day before BlackBerry’s second-quarter earnings release.

Other reports also suggest that BlackBerry is ditching hardware.

In July, it discontinued production of its Classic cellphone model. Other outlets also reported that BlackBerry has told major U.S. carriers like Verizon Communications Inc. and AT&T Inc. that all devices running BlackBerry 10 will be discontinued.

Last month, BlackBerry released “the world’s most secure Android smartphone” in an attempt to fight off the success of Apple Inc.’s (NASDAQ:AAPL) iPhone, which has stolen many of its contracts. For example, a few years ago 17,600 users in U.S. Immigration & Customs Enforcement were switched from BlackBerry devices to Apple’s iPhone after it was determined that Apple could better meet the department’s security requirements.

Weeks after its launch, the new phone model is already being discounted across multiple retailers.

According to The Globe and Mail, BlackBerry is finally starting to “shift its focus further away from its money-losing handset business and toward its software.” A true turnaround could finally be here.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Ryan Vanzo has no position in any stocks mentioned. David Gardner owns shares of Apple. The Motley Fool owns shares of Apple and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Verizon Communications is a recommendation of Stock Advisor Canada.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.