BlackBerry plans big job cuts as losses hit $1bn
Toronto, September 21, 2013
BlackBerry has warned that it expects to report a huge quarterly operating loss next week and that it will cut more than a third of its global workforce, rekindling fears of the company's demise and sending its shares into a tailspin.
The company, which has struggled to claw back market share from the likes of Apple Inc's iPhone and Samsung Electronics's Galaxy phones, said it expects to report a net operating loss of between $950 million and $995 million in the quarter ended August 31, due to writedowns and other factors.
Canadian Industry Minister James Moore voiced sympathy for workers at BlackBerry over its plans to cut 4,500 jobs.
"Our thoughts are with those who have lost their jobs at Blackberry, it is always a cause for concern for our government," Moore said in a terse two-sentence statement emailed just as markets closed.
"While Canada's economy is growing and creating jobs overall, we know there are still challenges ahead that we need to tackle so we can ensure continued economic growth and job creation," he added.
The results will put more pressure on BlackBerry to find a buyer for either some parts of the company, or for all of it. It said last month it is weighing its options, including an outright sale, in the face of persistently lackluster sales of its new smartphones, which run on the BlackBerry 10 operating system.
"The company has sailed off a cliff," said BGC Partners analyst Colin Gillis. "What do you expect when you announce you're up for sale? Who wants to commit to a platform that could possibly be shut down?"
BlackBerry's Toronto-listed shares fell as much as 23.7 per cent to C$8.25 on Friday, their lowest this year, before closing down 16 per cent at C$9.08. The company's Nasdaq-listed shares ended 17 per cent lower at $8.73, after falling as low as $8.01.
Waterloo, Ontario-based BlackBerry, once Canada's premier technology company, said it expects to book a $930 million to $960 million writedown in its fiscal second quarter owing to a ballooning stockpile of unsold BlackBerry Z10 devices.
The company had bet much of its future on the popularity of the Z10 touchscreen device - the first of the smartphones to be powered by its new BlackBerry 10 operating system. While the device drew favorable reviews, it has failed to gain traction among consumers since its introduction earlier this year.
For the second quarter, the company expects to have sold about 3.7 million BlackBerry smartphones to end users. BlackBerry said it is changing the way it accounts for device sales, now booking revenue only after a device is sold to the end-customer, and not to carriers.
Worryingly, most of the unit sales being recognized in the quarter are older-generation BlackBerry 7 devices. The company said it could not recognize BlackBerry 10 devices shipped in the quarter until those devices are sold through to end customers. That suggests carriers have been having difficulty moving the new line of devices.
BlackBerry said it expects its adjusted net loss, before giving effect to the inventory and restructuring provisions, will be in a range of about $250 million to $265 million, or a loss of 47 cents to 51 cents a share.
BlackBerry sees about $1.6 billion of revenue in the second quarter, of which roughly 50 percent is expected to be revenue from its services unit.
Analysts, on average, had forecast a loss of 15 cents a share on revenue of $3.06 billion, according to Thomson Reuters I/B/E/S.
"The revenue and device shipment numbers are pretty surprising given how weak it is," said UBS analyst Amitabh Passi. "I think many of us were expecting a pretty difficult quarter, but this is much worse than we anticipated."
The company, which had warned that job cuts were in the offing, plans to shed 4,500 jobs. BlackBerry has already undergone a major round of job cuts over the last 12 months. It employed 12,700 people as of March, and once had close to 20,000 employees.
BlackBerry said its cash position as of the end of the fiscal second quarter is estimated to be about $2.6 billion, down from about $3.1 billion three months earlier.
"It makes it even more difficult for somebody to step in and buy the company. If you look at what's been happening, they've burnt through approximately half a billion dollars in cash in the last three months," said Veritas Investment Research analyst Neeraj Monga.-Reuters