Why the BlackBerry Classic is critical to the new BlackBerry

The BlackBerry Classic, as its name implies, is a throwback to the company's glory days of old. But the smartphone plays an important role in what BlackBerry hopes to be.

Wednesday's BlackBerry Classic event kicked off like most other phone launches: a video played to hype up the BlackBerry name, CEO John Chen made a few remarks, then pulled out the Classic for a photo opportunity. But as the presentation went on, it was clear whom the company was targeting: the IT guy working in a highly regulated business.

The conversation dashed past the typical walkthrough of the Classic's features, spending a healthy chunk of time on the phone's enterprise software capabilities and looping in guests like the chief information officer for Citco Fund Services, the founder of Niederhoffer Capital Management and the chief operating officer of Ontario-based Mackenzie Richmond Hill Hospital.

It's a far cry from Alicia Keys, the pop music sensation BlackBerry once played up as its "global creative director."

The change in tactic is part of BlackBerry and Chen's attempt to transform the company from a pure device manufacturer into one more reliant on software and services. Services such as BlackBerry Messenger and its mobile device management platform, BES 12, are the future, but the company still needs BlackBerry phones to keep it in the mobile game -- and generating revenue.

"They need devices to underpin the core value propositions," said Charles Golvin, an analyst at Abelian Research.

A familiar face

The BlackBerry Classic takes its design cues from the BlackBerry Bold franchise -- the last flagship BlackBerry line that resonated with consumers. With its familiar trademark keyboard, it serves as a bridge for diehard BlackBerry users still typing away on their old Bold and Curve phones and gives them a reason to upgrade to the new BlackBerry 10 operating system.

While the smartphone was clearly designed to cater to BlackBerry's existing base, the company hopes to attract new users, touting the physical keyboard, messaging hub and longer battery life as attractive characteristics.

"I invite a lot of people who haven't used BlackBerrys before to have a try at it," Chen said. "I think you'll like it and be surprised by it."

But with a new generation of users weaned on touch-screen iPhones and Android devices, it's unlikely that many will take a chance on a platform that still lags behind on games and other personal apps.

"We shouldn't delude ourselves into thinking they will go after a broad appeal," Golvin said. He added the only potential customer growth could come from attracting former BlackBerry users into switching back.

"It's wishful thinking," said Avi Greengart, an analyst at Current Analysis.

Interest in BlackBerrys has waned over the years. Over the past five years, it went from a peak of a fifth of the market in 2009 to just below 1 percent in the third quarter, according to Gartner.

A quiet launch?

But BlackBerry isn't competing anymore in the mainstream smartphone market, a rough-and-tumble arena where Apple's iPhone reigns supreme and rivals such as HTC's One M8, LG's G3 and Samsung's Galaxy S5 battle for second place. While Chen has said his goal was to run a profitable smartphone business, that doesn't necessarily equate to huge volumes.

Just look at the BlackBerry Passport. The smartphone was launched with much fanfare in September, but aside from early preorder numbers, it has largely faded. AT&T, which vowed to carry the smartphone, won't carry it until next year. Analysts regard the Passport as more of a novelty.

Given the demand from hardcore BlackBerry users, the Classic may get different treatment. But Chen declined to comment on whether AT&T and Verizon Wireless would provide marketing support for the Classic, which launches in the quieter post-holiday period in January. BlackBerry is taking orders for the Classic now on its own website, selling a version compatible with AT&T and T-Mobile for an off-contract price of $449. AT&T and Verizon haven't provided specific availability and pricing.

Regardless, the BlackBerry devices play an important role. They remain a major financial pillar, making up 46 percent of the company's revenue in the fiscal second quarter. The company reports its third-quarter results on Friday.

More critical is the role the phones will play in convincing big businesses to switch to BlackBerry services, according to 451 Research analyst Chris Hazelton. While BES12 is able to manage multiple mobile devices, including iPhones and Android smartphones, the BlackBerry Classic gives the companies reason to upgrade their systems.

BlackBerry is offering the Classic with different enterprise and security bundles, an example of how it hopes to make money off of its security aspect. It's a sweet spot that Chen, who boasts a strong history with enterprise software companies, wants to get the company moving toward.

"It is very much enterprise focused at this point, and that's absolutely the future of the company, which I think is a good thing," said Jan Dawson, an analyst at Jackdaw Research.

Chen also has a more ambitious vision for devices, which goes beyond smartphones. "It's also the precursor for the whole [Internet of things] market," he said. "I don't look at devices as just a phone business. I look at it as much broader downstream."