By Ben Dummett
TORONTO-- BlackBerry Ltd.'s first major phone launch in nearly
two years underscores Chief Executive John Chen's commitment to the
device business. But tests loom as Mr. Chen pursues his ambitious
turnaround of the company amid uncertain demand for the new
phone.
BlackBerry unveiled its 4.5-inch square-shaped Passport
Wednesday simultaneously in Toronto, London and Dubai, touting the
device's large screen and apps geared to professionals as part of a
larger strategy to win back its traditional corporate and
government customers.
Under Mr. Chen, BlackBerry's ability to meet the Passport's
target launch date stood out against the delays that plagued the
company's previous global device launch in January 2013. The
BlackBerry 10 phones failed to catch on in a market dominated by
Apple Inc.'s iPhones and Android-powered devices.
The launch also highlights Mr. Chen's effort to reestablish the
company's credibility with investors and customers since he assumed
the reins last November.
BlackBerry had less than 1% of the global smartphone market in
the second quarter, according to International Data Corp.
"I'm sure we are on the way back," Mr. Chen said at the Toronto
event.
Investors will be looking for more evidence of that, including
reassurances the company is on track to meet its forecast of
achieving break-even cash flow in fiscal 2015. Mr. Chen said
Wednesday the company is "making good progress" in managing its
balance sheet and cash and is focused on reviving revenue
growth.
BlackBerry is scheduled to release its fiscal second-quarter
results Friday.
The Passport's square display sets it apart from the more common
rectangular screen. It also sports a new iteration of BlackBerry's
signature physical keyboard--one that can be swiped to scroll
through content on the screen above.
"The Passport is clearly unique," said Bob Hafner, a wireless
analyst at Gartner Inc. But Friday's earnings announcement is more
important, because "enterprise customers want to make sure the
company is still around" before committing to a new device, he
said.
BlackBerry will launch another device, dubbed the Classic, in
about two months, Mr. Chen said. Some analysts believe that phone's
success is more crucial to the company's turnaround because of its
broader potential appeal. BlackBerry acknowledged as much
Wednesday.
"I think the Classic will do more" in sales volumes, Mr. Chen
said.
The Classic will more closely resemble the BlackBerry Bold, the
company has said, and is meant to appeal to existing customers who
favor the device's traditional qwerty keyboard and trackpad.
BlackBerry believes the Passport addresses about 30% of the
mobile market and has priced it aggressively. In the U.S., the
Passport will cost $599 without a contract, below the starting
price for Apple's new iPhone 6 and iPhone 6 Plus phones, which
start at $649 and $749, respectively.
The device is also cheaper than Samsung Electronics Co.'s
flagship Galaxy S5 smartphone, which went on sale in the U.S.
earlier this year for about $650 depending on the carrier.
BlackBerry wouldn't provide sales forecasts for the
Passport.
"We think [the phone] is going to exceed our expectations," but
it is "a wait and see for us" as the phone's square shape is
somewhat "polarizing, " said Ron Louks, head of BlackBerry's
devices business.
BlackBerry needs to sell 10 million phones a year to make money
from its handset business. In its fiscal first quarter ended May
31, the company sold 2.6 million.
"If [the Passport] is successful, it will accelerate our
turnaround efforts," but if not, "I will still be able to continue
to engineer this turnaround," Mr. Chen said ahead of the Passport's
launch.
He also is counting on sales from the Classic and the release of
upgraded device management software.
In the U.S., BlackBerry plans to sell the Passport through
AT&T Wireless, but didn't say when. The company began selling
the phone Wednesday over its website in the U.S., U.K., Canada,
France and Germany. It will also sell the phone through Amazon.com
Inc. and make it available in more than 30 countries before the end
of the year through various carriers.
The Passport faces tough competition. Samsung already dominates
the larger-display market, and Apple sold more than 10 million of
its new iPhones last weekend.
Apple has also unveiled a mobile payment system that will allow
users to buy merchandise with the wave of an iPhone, staking out a
presence in a sector where efforts by other major technology
companies, including BlackBerry, have yet to bear fruit.
"BlackBerry is very much in the sights" of Apple and Samsung in
the enterprise markets that the Canadian smartphone maker is
targeting, said Charles Golvin, founder of Abelian Research.
Samsung has put a lot of investment into offering enterprise
customers greater security, while Apple's partnership with
International Business Machines Corp. is meant to help ease
concerns about security over Apple's devices, he said.
Citigroup analyst Ehud Gelblum believes Passport's target market
is too small to make a difference.
"We expect this phone to appeal only to the high-end corporate
executive market, which we estimate is quite small and being
encroached on by others," he said in a note to clients.
Write to Ben Dummett at ben.dummett@wsj.com
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