August 10, 2017 2:39 pm JST

BlackBerry hopes to power internet of things

Indonesia still key market as Canadian company switches from devices to security software

SIMON ROUGHNEEN, Asia Regional Correspondent

BlackBerry CEO John Chen meeting guests at an Aug. 9 event in Jakarta hosted by the Indonesian Canadian Chamber of Commerce and American Chamber of Commerce in Indonesia (Photo by Simon Roughneen)

JAKARTA -- For a decade or so before the market for touchscreen smartphones took off around 2010, BlackBerry's hand-held communication devices were ubiquitous among thumb-jockeying executives trying to keep in touch with the office outside working hours.

After several recent failed attempts to launch new phones and operating systems to compete against Apple, Google and Samsung Electronics products, the company that "made the modern cellphone," as BlackBerry's CEO John Chen puts it, is hoping to become the main supplier of secure applications and software for the next generation of internet-linked devices -- the much- touted "internet of things" -- from web-connected self-driving cars to "smart" domestic appliances that are expected to take off over the coming decade. 

"It's going to be very much driven by securing end-point communications," Chen told the Nikkei Asian Review. "We want to be the number one secure communications in IoT. We have signed a deal with Ford for seven years to help them build their next generation cars."

Chen told an event in Jakarta organized by the American and Canadian chambers of commerce that using BlackBerry technology means "you can never be eavesdropped on."

Chen's speech in Indonesia -- BlackBerry's biggest market with around 60 million users "one way or another," according to the CEO -- came a day after the company's shares fell more than 3% after U.S. investment bank Goldman Sachs recommended that investors sell the stock.

In a client note, Goldman Sachs analyst Gabriela Borges said that while BlackBerry's products aimed at securing car computer systems were promising, it was too soon to say how long it would take the self-driving car market, which is still in its infancy, to drive earnings.

Security applications

BlackBerry declined to comment on the Goldman Sachs note, but Chen predicted that an autonomous vehicle would come out by 2021, "or maybe a bit later," adding that BlackBerry expertise would be vital to ensuring that such cars could not be hacked or commandeered remotely over the internet.

"A car without proper security or anti-hacking [systems] will become a weapon," he said, noting the recent use of cars as weapons by terrorists in major European cities such as Berlin and London.

Internet-enabled cars are one aspect of the IoT market that Gartner, a U.S.-based research company, predicts will reach 20.4 billion devices in use worldwide by 2020. up from 8.4 billion this year. According to Ericsson, "around 29 billion connected devices are forecast by 2022, of which around 18 billion will be related to IoT."

"We will be a much more massive tech company because of that," he said, taking a bullish tone on BlackBerry's prospects of carving out a lucrative niche in the nascent IoT market.

Chen added that BlackBerry's image would help in this regard. "If you remember the main thing about the Blackberry was security, reliability," he said.

Attempting to put distance between BlackBerry and other tech companies, Chen said that user data that pass through the company's servers are over-written, rather than retained. BlackBerry "never monetize[s] our customers data," he added, in a seeming dig at the business models of companies such as Facebook and Google.

Chen also reflected on some reasons for BlackBerry's decline over the last decade. Popular for its secure messenger service, the Canadian company lost ground as first, Apple's iPhone, and then devices made by Asian manufacturers such as Samsung and Huawei came to dominate the market, bolstered by comprehensive application libraries provided by Google's Android operating system and Apple's iOS. "One reason we lost the cellphone market was the lack of applications," Chen said.

More recent rival devices carried an array of free instant message or chat services such as WhatsApp, WeChat, Line, Viber, Telegram and Facebook Messenger, all of which reduced the once unique appeal of BlackBerry's free, in-house messenger service, which had earlier stood out against text messages delivered at a cost and usually unencrypted over regular phone networks.

Iconic status

In an ironic development, BlackBerry ended up creating applications enabling users of its old messenger service, still known by its acronym BBM, to chat and message on rival Apple and Android-enabled smartphones -- with the app now serving as the main platform for BlackBerry's market in Indonesia as BBM users choose from a range of other smartphones.

Indonesia therefore will remain a key market for BBM in Chen's view -- and for other social media and messaging providers. Of Indonesia's 260 million population, around 130 million have internet access, with an estimated 70 million more potential users who will get online over the next half decade if mobile networks expand across the archipelago's more remote 17,000 islands, with current coverage black spots including inland swathes of large islands such as Kalimantan and Sulawesi.

With habits perhaps honed by hours spent stuck in the city's often-gridlocked traffic, Jakarta was in the past touted as the world's "Twitter capital" while Instagram, the photo sharing application, recently said that Indonesia was its biggest user by country in the Asia-Pacific.

In 2009, BlackBerry's sales accounted for 20% of the global smartphone market. But even though in 2011 BlackBerry, then known as Research in Motion, sold a record 50 million smartphones worldwide, it was declining in relative terms as rivals appealed to the wider consumer market instead of the business and executive clientele that was the focus of BlackBerry.

As rivals saw sales skyrocket, BlackBerry suffered a crash landing with only 4 million units sold in 2016 -- a mere 0.1% of the global market, as competing touchscreen models proved more popular than the once-iconic mini-keyboard format beloved of "berry" enthusiasts such as former U.S. President Barack Obama.

Because of BlackBerry's iconic status, its downfall gained wide media attention. But Chen is confident that BlackBerry is finding its feet again. "Three and a half years ago the company was teetering, it had lost its way," he said. "Now we have about $2.6 billion in the bank."

"The revenues are a lot smaller now, but the margins are much higher," he said, explaining how the company ditched its once-lucrative but costly hardware business in favor of a complete focus on software.

Despite a lamentable history of false starts for BlackBerry's attempts to catch up with its smartphone rivals, new BlackBerry devices are appearing on Asian shelves as the company teams up with local manufacturers and partners that are licensed to produce new devices.

BlackBerry said in 2016 that it would no longer make its own phones. Last December, it licensed Chinese consumer electronics makers TCL to make the KEYone model. Aimed at the middle and high-end market, the device, with the signature blackberry keypad, went on sale in China at the beginning of August.

BlackBerry has also partnered in Indonesia with media and tech companies Emtek and Merah Putih to enhance its BBM service and to make the phones under license, with the first Indonesian-made BlackBerry phone, the Android-enabled Aurora, recently going on sale in Jakarta.

"In order to fight people like Apple and Samsung we need local partners," Chen said. "BlackBerry will [also] become a technology licensing company."

Asia300

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