The plan to resurrect the faltering Blackberry smartphone brand in the U.S. and Canada is being crafted in the Irvine Spectrum.
That’s where Steve Cistulli is assembling a stand-alone unit under the umbrella of Chinese conglomerate TCL Communication Technology Holdings Ltd. The goal is to win back carriers and enterprise customers that have fled the once-influential smartphone brand over the past several years.
“We’re almost starting over again with the business,” said Cistulli, president and general manager of TCL Communication’s North American operation, which is based in Irvine. “We need to build from the ground up.”
New Strategy
Cistulli, who joined the Shenzhen, China-based manufacturer four years ago, laid out his strategy with the Business Journal in a private meeting this month at the Encore Tower Suites in Las Vegas on the eve of CES, the world’s largest consumer electronics show.
TCL employs about 80 at its Irvine Spectrum operation in sales and marketing, supply chain, research and development, engineering, finance, human resources, quality assurance, testing and administrative personnel.
The company has gradually expanded its presence at the same building since its U.S. launch in 2009.
It employs more than 200 in North America, with operations in Seattle, Kansas City, Miami, Atlanta, Dallas/Fort Worth and New Jersey, primarily near major telecoms, such as AT&T, T-Mobile and TracFone Wireless.
The multi year licensing agreement with Blackberry seems to reflect necessity as much as opportunity for both companies.
Blackberry’s position and smartphone sales have sunk to new lows as the Waterloo, Canada-based company transitions to security software manufacturing.
TCL, meanwhile, has little room to pick up market share in the U.S. and Canada with its entry-level devices, prompting a change to its business model.
TCL operates Irvine-based Alcatel OneTouch.
Blackberry is shipping less than half a million units per quarter, according to market trackers, a steep decline from the turn of the decade when quarterly shipments surpassed 10 million units.
Blackberry’s revenue, which peaked in 2011 at $19.9 billion, fell to $2.1 billion last year—the fifth consecutive steep drop.
The company has lost more than $6.3 billion in the past three years.
The brand’s security software, which helped fuel the “Crackberry” craze in the mid-2000s among business executives and government workers, is still considered the gold standard in the maturing smartphone market.
The agreement with TCL calls for Blackberry engineers to continue to update and refine security software. That is expected to provide TCL customers a trusted component in new smartphone models, such as the rumored Mercury device, which TCL showed to select media during CES, capping months of speculation in the press.
“Just by signing this licensing deal we are able to compete in the Tier 1 space,” said TCL’s Cistulli, who rates the current state of the Blackberry brand at six out of 10.
“The window is closing, and we need to move quickly. I do have the confidence that the team can do this,” he said. “This is where the brain trust is. It’s in Orange County.”
The latest development comes roughly three months after Blackberry announced it would stop smartphone production and less than a month after TCL signed a licensing deal with the company.
BlackBerry will license its security software and service suite, as well as related brand assets, to TCL, which will design, manufacture, sell and provide customer support for BlackBerry-branded mobile devices.
TCL has exclusive global rights, except in India, Sri Lanka, Bangladesh, Nepal and Indonesia.
Financial details of the licensing agreement were not disclosed.
‘Bringing Back Commitment’
TCL Communication is in the midst of hiring a sales force across the U.S. and Canada to develop enterprise channels to serve customers in the government, finance and healthcare sectors—three pillars Blackberry has targeted over two decades since it ushered in the era of smartphones.
One of Cistulli’s first hires was Bruce Walpole, who heads the new business unit as general manager of BlackBerry Mobility, North America. The telecom veteran, who is based in Dallas, spent more than eight years as a Blackberry executive, including roles as director of Carrier Product Management in the Americas and senior director of U.S. Carrier Device Sales.
The strategy is largely centered on bringing back government, healthcare, and finance customers back—those that helped Blackberry dominate the early days of the smartphone race and build a viable business model for nearly a decade before the massive adoption of Apple and Samsung smartphones took root in the U.S. and Canada. Apple and Samsung now combine for more than 80% of market share in the two countries.
Blackberry, at less than 1% market share, isn’t among the top five market leaders, according to the latest figures released by Stamford, Conn.-based industry tracker Gartner Inc.
Blackberry’s slide in recent years came amid some workplace changes, as business customers, government agencies and other enterprises in the finance and healthcare sectors began to allow employees to bring their own approved devices to work.
The shift means that TCL Communication must develop new models and features on par with competitors for Blackberry-branded devices and provide ongoing customer support.
“Without that commitment the enterprises weren’t too keen on the Blackberry devices,” Cistulli said. “Now we’re bringing back that commitment for year-over-year support.”
TCL Communication has plenty of resources to leverage in the effort, from supply chain to deep financial pockets.
The fourth largest U.S. mobile phone manufacturer posts annual sales topping $5 billion. Its parent, TCL Corp., has annual revenue eclipsing $15 billion.
