Riding on the back of a good quarterly report, BlackBerry (NASDAQ: BBRY) said last week on October 12 that it signed a licensing deal with BLU Products. BLU is one of the few phone suppliers that targets the budget market in North America.
Last year, BlackBerry sued BLU for patent violation. With the new agreement in place, BlackBerry will continue monetizing its massive patent portfolio. The beleaguered smartphone developer needs to monetize its IP, then deploy the cash into its software business. BlackBerry exited the hardware aspect of the smartphone market but still has software interests in this market segment.
The lack of hardware exposure removes the risk of being late in phone development but it also caps the profitability of its smartphone business. The company depends on its hardware partners to distribute, market, and sell BlackBerry-based Android phones. In the last quarter, revenue from the smartphones business was negligible.
In 2015, Blu shipped 15 million units, up from 4.1 million in 2013. Blu could have shipped up to 25 – 30 million units in 2017. The company sells phones at the very low end, so the profit per unit could barely surpass $100. Blu could have negotiated a sub-$1 payment per unit with BlackBerry. But if Blu implements secure solutions from BlackBerry, both companies would see profitability soar.
