BlackBerry announced today that it would be partnering with Foxconn to produce devices going forward, and CEO John Chen revealed a few details about the first fruits of that partnership on the company’s earnings call today.
The first smartphone from Foxconn with BlackBerry branding should arrive in March or April 2014, he says, and be a 3G device based on BlackBerry 10. It’s going to launch in Indonesia first, and Chen says they have another six or seven markets the company has identified for it to spread to later on.
This should help BlackBerry lower its exposure to financial risk, while giving it room to work on its device pipeline in a way that will help it produce better BB10-based devices, Chen offered on the call. That’s likely true, but the key ingredient here will be price. With companies like Motorola aggressively going after emerging markets with devices like the low-cost Moto G, BlackBerry won’t just have to contend with players like Nokia for the growing international market of low- to mid-range smartphone devices.
The new Foxconn devices will be manufactured at facilities in Mexico and Indonesia, and BlackBerry will retain all intellectual property associated with the devices and also do product quality assurance on devices coming off the line to make sure handsets live up to expectations. BlackBerry will recoup revenue from the sale of the devices, Chen said on the call, but it’ll also free up their in-house designers to work on “very high-end” devices aimed at developed markets.
“For the forseeable future, in North America, our designers will focus on enterprise handsets only,” Chen said about BlackBerry device strategy going forward. “Most of all I’m going to depend on Foxconn for consumer devices,” he added, noting that they’ll be working on consumer hardware not only for developing markets, but also for mature markets, too down the road. With this partnership, Chen said he hopes Foxconn will be working on hardware almost exclusively, leaving BlackBerry to concentrate on software.
Chen also noted on the call that he has “already held one in [his] hand,” referring to the first BB10 device from Foxconn, and went into surprising detail about the financial relationship between the two partners. BlackBerry will shoulder the cost of manufacturing by paying Foxconn direct once production spools up and costs are concrete, but offloads the financial charges associated with carrying inventory. It will reap the revenue from the sale of devices, and there’s a provision in the agreement whereby Foxconn starts to also take a portion of that revenue if it exceeds a certain amount.
It’s an interesting project, and it’s even more interesting that Chen is so forthright and transparent about exactly how it’s structured and how things are going to go down in terms of launch markets and timelines. He also noted that this is a deal that he inherited from outgoing BlackBerry leadership, but one that he believes is a good, strong plan. It definitely makes for a very different take on what BlackBerry becomes as a smartphone company, and it’ll be interesting to see how this all pans out once devices start making their way out to consumers.
