BBRY Blackberry Limited

By Ben Dummett 

BlackBerry Ltd. unveiled a second Android-powered phone on Tuesday, doubling down on efforts to revive its struggling handset business even as its first bet on the popular operating system is yet to pay off.

The new device, along with BlackBerry's broader handset effort, face an uphill battle as the Canadian company's smartphone sales have shrunk to a fraction of former levels amid competition from rivals such as Apple Inc. and Samsung Electronics. Co.

That is pushing some analysts to call on BlackBerry to give up on handsets, as the device maker accounts for less than 1% of global smartphone market, and to focus only on higher-margin mobile-security software and related services.

"Without significant scale it's very hard to make money on Android," said Gus Papageorgiou, an analyst at Macquarie Group Ltd.

For the quarter ended May 31, BlackBerry's handset business had an operating loss of $21 million.

The once-dominant smartphone maker covets a profitable handset business to augment sales of its growing, but still relatively small, software and patent licensing division. Achieving profitability would also afford BlackBerry more time to develop new secure devices that connect consumer and industrial products to the web.

BlackBerry's new phone, called DTEK50, will retail for $299, and offers a 5.2-inch screen and all-touch keyboard. The company has loaded it with proprietary encryption technology to protect photos, contacts and other data against cyberattacks. The device includes an alert system to tell users when social-media applications are tracking their locations or accessing a phone's camera or microphone. It also offers productivity tools such as the company's unified inbox that compiles email, text and other messages in one place.

"We built the phone to hit not only a price point that's good for fleet deployments where companies are providing the devices, but at a price point and with the feature set that makes it of great interest to consumers," Alex Thurber, BlackBerry's senior vice president for global device sales, said on a webcast. The company also plans to launch another Android device shortly, this time with a physical keyboard, Mr. Thurber said.

Smartphones powered by Alphabet Inc.'s Android operating system control more than 80% of the global smartphone market.

BlackBerry needs a device hit as handset sales continue to fall despite releasing a string of new smartphones, including three powered by its BB10 operating system, since September 2014. It launched the Priv, its first Android phone, in November. Overall, BlackBerry sold 500,000 devices in its latest quarter, down from 2.1 million in the quarter ended Aug. 30, 2014.

Earlier this month, the company announced plans to stop making its Classic smartphone, fueling speculation that it may abandon the BB10 operating system. The company, however, says it is committed to its proprietary system.

BlackBerry has said BB10-device sales were hurt by a lack of social media and entertainment apps that are only available on Apple's iPhones and Android-powered devices.

The Priv was meant to address that issue by combining BlackBerry's encryption technology with access to the popular Google Play app store.

BlackBerry hasn't disclosed Priv sales, but the number of phones on which BlackBerry recognized revenue is down almost 17% since the device's launch. Priv's initial hefty price tag of $699 in part hampered demand and BlackBerry has said longer-than-expected contract talks with U.S. carrier Verizon Wireless hindered sales.

DTEK50 is priced at a steep discount to the Priv, underscoring BlackBerry's attempt to appeal to a broader audience.

The market for midprice smartphones, however, is crowded with offerings from firms such as Samsung and LG Electronics Inc. In March, Apple also introduced a lower-priced iPhone.

Sales of the new BlackBerry device could also suffer because the company hasn't announced any partnerships with major U.S. wireless phone operators to distribute the device. That is a potential setback as carrier support would offer an endorsement of the product and greater availability. AT&T Inc. offered the Priv at the time of that device's launch.

BlackBerry said it expects to begin delivering the new phone during the week of Aug. 8, but will take preorders starting Tuesday from customers in the U.S., Canada, the U.K. and several other European countries. It also has deals with more than 40 distributors globally to help generate sales. In the U.S., the company will initially distribute the phone through Amazon.com Inc., and retailers Best Buy Co. and B&H Foto & Electronics Corp.

Write to Ben Dummett at ben.dummett@wsj.com

(END) Dow Jones Newswires

July 26, 2016 14:20 ET (18:20 GMT)

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