BlackBerry plans to offset its falling service segment revenues

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BlackBerry’s services segment revenues continue to decline

Earlier in this series, we discussed BlackBerry’s (BBRY) hardware and software businesses. But there’s another important business for BlackBerry, which is its service segment. Under this segment, the company earns revenues from the push email service and the BlackBerry Messenger or BBM service that it provides.

BlackBerry derived 46% of its revenues from its service segment, which was down from 54% in the corresponding quarter a year ago. BlackBerry also mentioned that its service fees declined by 13% compared to last quarter. As the chart below shows, the company’s services segment revenues continue to decline.

BlackBerry services segment

How BlackBerry plans to revive its service segment

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In the last few years, BlackBerry has made a conscious effort to open up its platform on rivals’ platforms. It released the BBM app for free on the Apple (AAPL) iOS and Google (GOOG)(GOOGL) Android platforms a few months back. More recently, it also released the app on the Microsoft (MSFT) Windows platform. Offering its BBM service for free has resulted in a decline in BlackBerry’s service revenues. But the move has helped BlackBerry gain subscribers.

During the conference call to announce earnings, BlackBerry’s management mentioned that it now has 91 million monthly active users for its BBM service, up from 85 million in the previous quarter. Management also mentioned that it has started to monetize BBM through the BBM Protected program, which provides a more secure messaging service for government and healthcare enterprises.

Market Realist published an article titled BlackBerry’s must-know plans to monetize its messaging service in which we discussed how BlackBerry is planning to target revenues of $100 million from the BBM service by the end of fiscal year 2016. But, despite all these efforts, BlackBerry’s BBM service is showing slow growth compared to other popular messaging apps such as WhatsApp and WeChat. Facebook (FB) acquired WhatsApp for $19 billion earlier this year, increasing the competitive pressure on BlackBerry.

BlackBerry also introduced its Blend service, which is a dashboard specifically designed to synchronize personal and official email accounts, calendar, text messages, and BBM messages on different devices such as Mac, iPads, Android smartphones, and tablets from the BlackBerry device in a secure manner. The company is quite bullish about this service and hopes that it will help BlackBerry offset the revenue decline from the service segment.

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