Sep 28, 2015 ยท 5 minutes

Imagine if Hershey's future depended on the success of the Reece's Peanut Butter Cup and you have a pretty good idea why BlackBerry is hoping you'll like its new Priv smartphone.

BlackBerry, in the midst of a two-year turnaround, needs some good news. On Friday, it said revenue in its most recent financial quarter fell 47 percent to $490 million. Analysts had been expecting $603 million. Revenue from smartphones fell 52 percent as the number of devices activated in the quarter fell to 800,000 from 2.1 million a year ago. Blackberry introduced new models like the Passport and the Classic but its market share continues to shrink.

As an effort to reverse that trend, BlackBerry has developed a slider phone that runs on the Android mobile operating system and features BlackBerry's long-loved keyboard. It's putting Google's peanut butter (or Lollipop 5.1, but why mix metaphors?) inside BlackBerry's chocolate. Two great tastes that taste great together

The phone, initially called the Venice, will be launched under the less elegant name of the Priv. The new name emphasizes another feature of the phone, which is the first Android phone that includes robust security features favored by workers in governments or companies that prize security. The Priv will implement grsecurity, a security enhancement to the kernel used in the Android OS as well as BlackBerry Safeguard, a set of security apps available on existing BlackBerry 10 phones.

BlackBerry received a lesson in the need for privacy last week when photos and details about the Priv leaked, prompting the phone's announcement in conjunction with BlackBerry's less-than-encouraging financial report. The company tried to roll with things, placing a full-page ad in the Wall Street Journal and publishing a blog post on CNBC authored by its CEO John Chen.

“We found this breach of privacy extraordinary, and at the same time the best demonstration as to why BlackBerry's products, technology and brand are essential to the world,” the ad read. Chen also appeared on Canada's Business News Network to offer a hands-on demo, an awkward interview that was pretty much the antithesis of the Apple Events staged to unveil new iPhones.

But that is BlackBerry in 2015 – ever since the introduction of the iPhone eight years ago, Apple and BlackBerry have seen a reversal of fortunes in market share for smartphones. What's killing BlackBerry isn't so much technology that nobody wants, it's the scarcity of developers building apps for any platform not called iOS or Android. People shun phones without a lot of readymade apps. So developers don't write apps for those phones. And so people shun phones... And so on.

BlackBerry will launch the Priv later this year, likely in time for the holiday season. The company says four major carriers are expressing interest in supporting the Priv. It's too early to tell how it will resonate with buyers, but on paper the concept is promising. It gives Android users access to the bubbled keys that are faster and far easier to use than a touchscreen keyboard. It gives enterprise users in governments and the financial and healthcare industries a more secure Android device. 

Most of all, it give BlackBerry something it's needed for years – entry into the robust Android app ecosystem. As Chen put it in his interview with BNN, 

Everybody loves the BlackBerry 10, they really do. But there's not enough apps. So if I can apply all those apps on the BlackBerry 10, that would be a smashing success. Unfortunately, I can't put the two together for all the practical reasons, logistic and financial reasons, so this is the best thing we could do. The early indications from carriers and some of the customer's who saw it it is that they love it.

Again, if that explanation lacks the polish and the tone of exalted astonishment that reveals new iPhones to an applaud-happy audience, it's in keeping with Chen's unassuming, unpretentious style. Chen is a normal guy who just happens to be very good at turning around troubled companies (he did it at Sybase, and insists he can make BlackBerry profitable within six months). The Priv seems to be exactly as Chen presented it in the video: A dark-horse product from a dark-horse tech company.

BlackBerry posted a net loss of $66 million, or 24 cents a share (versus a 39-cent loss a year earlier). That loss came even though BlackBerry has cut its operating expenses 31 percent through layoffs and cutbacks over the past year. Chen has said the company's focus is now on increasing revenue to make sure profits don't come simply from cutbacks but are able to be sustained by growth in coming years. 

But so far the growth strategy has faced an uphill battle. Not only have the Classic and Passport seen disappointing sales, the software division has also been slow to grow. Chen has said software sales would double to $500 million next year, but the division increased sales by only 19 percent last quarter. One reason for the slow start is that BlackBerry is switching the way it accounts for software revenue from a single, up-front payment to a monthly subscription.

Still, Chen is holding to his targets of $500 million in software sales and a return to profits by next March – although much of the growth in software revenue may come from recent software acquisitions like AtHoc and Good Technology. In the meantime, the company has $3.4 billion in cash and investments. 

The stock, which fell 8 percent Friday following the earnings report, is also valued at $3.4 billion. It's somewhat rare for stocks to be valued below the cash they own, unless investors fear a liquidation ahead. That's not the case with BlackBerry. It's more that the company is in the darkest hour of its turnaround. After years of decline, BlackBerry has finally hit bottom. Or, at least, what had better be the bottom.

Reviving demand for its smartphones would give BlackBerry a much needed boost. The move to Android may be its last best hope in the handset market. One analyst asked in the earnings call, “when do you throw in the towel on BB10 and just say I'm going to focus on Android?” Chen replied,

Well, first of all, we'll have to make sure that Android is successful... but if our plan of doing the BlackBerry Android type of implementation works well and the security side of the equation is well accepted by governments and this base, of course we could then replace them or merge them into it.

BlackBerry the OS may fade into oblivion, but Blackberry the company may still survive by building a better Android phone – one that is more secure and much easier to type on. And simply by letting its loyal users have access to the apps that other Android users have been enjoying, the company has a new hope of staying relevant in the smartphone era.