BlackBerry to Launch Android Smartphone

Announcement comes as Canadian company reports disappointing earnings results.

An employee walks past signage displayed at BlackBerry Ltd. headquarters in Waterloo, Ontario, Canada. On Friday, the company reported it was launching a new smartphone that would run on Google Inc.’s Android operating system.

An employee walks past signage displayed at BlackBerry Ltd. headquarters in Waterloo, Ontario, Canada. On Friday, the company reported it was launching a new smartphone that would run on Google Inc.’s Android operating system. Photo: Bloomberg News

BlackBerry Ltd. confirmed Friday it would launch a new Android phone to help bolster its sagging device business, while reporting disappointing results amid signs of weakness in its bid to revive growth from sales of device-management and security software.

The Canadian smartphone maker had been rumored to be planning a new device powered by Google Inc. ’s Android operating system sometime this year to help revive sales of its handset business.

The new device, expected to launch late this year, will be called Priv. Chief Executive John Chen says the name reflects the company’s longtime focus on protecting customers’ privacy when using mobile devices. The curve-sided phone will offer both a touch screen and slide-out keyboard, Mr. Chen said on a conference call.

BlackBerry didn’t offer details on distribution or expected pricing of the new device, but the move underscores the underwhelming performance of the company’s existing phones. Since last September, BlackBerry has released a string of new devices, including the square-shaped Passport; the Classic, which is modeled after BlackBerry’s once popular Bold device; and the Leap. All are powered by BlackBerry’s BB10 operating system and are meant to appeal to different segments of corporate and professional users.

But in the second quarter, BlackBerry said it has recognized hardware revenue on “over 800,000 BlackBerry smartphones.” That is down from 1.1 million in the first quarter.

By launching an Android operating system, BlackBerry is betting it can revive handset sales and make the business profitable by adopting the most widely used smartphone operating system. Still, the phone faces stiff competition from Android devices offered by Samsung Electronics Co. , Motorola and others. BlackBerry also plans to maintain its BB10 operating system, adding costs to the handset business at a time when the company is focused on cost-cutting.

BlackBerry, which plans to launch the new device later this year, is betting the phone’s added security features and work productivity tools will differentiate the smartphone from rival Android devices.

In its latest quarter, BlackBerry reported software and services revenue of $74 million, up from $62 million a year earlier, but down 46% from the $137 million reported in the first quarter.

The revenue measure is a key one for the company, which is largely relying on sales of device-management software, known as BES 12, and phones aimed at business customers, to help fuel growth. BlackBerry is targeting $500 million in software and licensing revenue for fiscal 2016.

Still, the sequential decline in software revenue suggests BES12 is struggling against rival products from Citrix Systems Inc., MobileIron Inc. and VMware Inc. ’s AirWatch.

Mr. Chen is confident BlackBerry’s turnaround is on track, as the company is forecasting “modest” sequential revenue growth in each of the remaining quarters of fiscal 2016. “I am confident in our strategy and continued progress,” he said in a statement.

BlackBerry is down about 3% premarket on Friday, while shares are off 36% year-to-date.

For the latest quarter ended Aug. 29, BlackBerry posted a profit of $51 million, compared with a loss of $207 million a year earlier.

Adjusted to exclude items, it lost 13 cents a share, worse than the nine-cent loss expected by analysts polled by Thomson Reuters.

Total revenue fell 47% to $490 million, well below the $611 million analysts had projected.

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