A Look At BlackBerry's Different Business Model

BlackBerry Ltd BBRY provided investors with a closer look of its new business model on Tuesday, which resulted in a pop of more than 2 percent in the company's stock.

BlackBerry announced back in September that it will no longer manufacturer its own hardware devices, once considered the undisputed smartphone leaders.

All of the company's internal hardware development will end and will now be outsourced to various partners.

BlackBerry's CEO John Chen said at the time that the company is no longer operating as a smartphone company, rather it is contributing toward the "smart" part of the phone. The move to ditch its hardware business was met with mixed reaction from investors and Wall Street.

"I could never figure out what they were bothering to do in the hardware business," Ross Healy, chair of Strategic Analysis Corporation and a longtime BlackBerry investor, told Canada's CBC News. "Far better to stick with your strength and let somebody else get into the phone business."

On the other hand, Imperial Capital's Michael Kim pointed out that there was considerable uncertainty related to new licensing agreements, end user demand for new handsets based on BlackBerry's Android software and steady-state royalty rates.

Q3 Update: So Far So Good

In conjunction with BlackBerry's third-quarter earnings report on Tuesday, management provided an update to its handset business.

BlackBerry's chief financial officer Steve Capelli said BlackBerry's handset business made $5 million in profits, which marks an improvement from the $8 million loss it recorded in the prior quarter.

The company's CEO also added that the business move to a software-only model will be positive for revenue growth and margin growth and will be driven by a favorable overall revenue mix.

In addition, BlackBerry confirmed that the first smartphone made and sold by its partner companies will likely be released in January of next year.

Image Credit: By Blackberry (http://blackberry.com) [Attribution], via Wikimedia Commons