BlackBerry Ltd to cut 4,500 jobs, announces close to $1-billion writedown

Matthew Braga | 20/09/13 | Last Updated: 20/09/13 6:13 PM ET

Mario Tama/Getty ImagesChief Executive Officer Thorsten Heins was counting on the new BlackBerry 10 phones — introduced in January to good reviews — to reverse a sales slide. Instead, its market share continues to slide and BlackBerry remains unprofitable.

 

With no buyers in sight, and a massive inventory of unsold phones, BlackBerry Ltd. will cut 4,500 jobs worldwide as executives seek to keep their company alive as it teeters on the brink of disaster.

BlackBerry announced Friday it would be laying off nearly 40% of its global workforce, marking a new nadir for a company that’s seen its share of ups and downs.

Here is a look at some of the numerical milestones for BlackBerry, previously known as Research In Motion:

• Entertainment industry awards: 2 (1994 Emmy for technical innovation, 1999 Academy Award for Technical Achievement)

• Lowest stock price: $6.10 (Sept. 24, 2012)

• Years the BlackBerry has been in existence: 14 (first BlackBerry wireless handheld device in 1999, first BlackBerry smartphone in 2003)

• Years as a publicly traded company: 16

• Years in business: 29 (founded in 1984)

• Countries in which the company has offices: 36

• Highest stock price: $149.90 (June 8, 2008)

• Countries in which BlackBerrys are sold: 175

• Number of employees cut in most recent layoff: 4,500

• Number of remaining Employees: 8,200

• All-time high number of employees: more than 20,000

• Current subscribers: 72 million

• All-time high number of subscribers: 80 million

• Projected loss for second quarter of current fiscal year: between US$950 million and $995 million
The Canadian Press

The struggling Canadian smartphone maker also announced Friday afternoon that it expects to post a loss of nearly US$1-billion dollars when the company reports its second quarter earnings next week, citing “the increasingly competitive business environment impacting BlackBerry smartphone volumes.”

The move confirms an earlier report that the company had plans to reduce its workforce by up to 40% by year’s end, as part of ongoing restructuring efforts.

For many Canadian investors, it is an eerie reminder of Nortel Networks’ last days, when plummeting sales, heavy write downs and widespread layoffs sent the country’s last reigning tech giant into a free-fall from which it was unable to recover.

“The company has sailed off a cliff. 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?” said BCG Partners analyst Colin Gillis.

BlackBerry has slashed more than 7,000 jobs since 2011, and hundreds more in recent months, as it struggles to compete with competitors such as Apple Inc., Google Inc. and even Microsoft Corp., whose smartphones and app ecosystems have proven more attractive to consumers — and even enterprise customers — than BlackBerry’s own.

“They’re trying to arrest their slide by cutting head count. I think that’s going to make it really difficult,” said Pacific Crest Securities analyst James Faucette.  ”There’s also some hope that by taking these steps right now, it helps cleans things up for any type of potential deal or acquisition that they’ve been very forthright about seeking.”

The Waterloo, Ont.-based company is also expected to write down as much as US$960-million in unsold inventory — based mostly on the severely diminished value of its Z10 touch-screen phone.  It’s last three write downs — a pretax expense of US$485-million in December 2011, a second charge of $267-million the following March and a third write down of US$335-million in June 2012 — were attributed, in part, to the company’s similarly ill-fated PlayBook tablet.

BlackBerry’s fate is inextricably tied to the success or failure of BlackBerry 10, the smartphone maker’s revamped mobile operating system, launched in January to much fanfare by chief executive officer Thorsten Heins.

Mr. Heins is planning to reduce his company’s total headcount to 7,000 full-time employees worldwide as part of ongoing cuts. The company had 12,700 employees as of the end of March, the last time it has reported the size of its workforce.

 

Shares in the company plummeted as low as 24% as investors reacted to the news and could have been much worse, had the company not already been trading below what many feel is the value of its cash and assets, assuming the company is broken up and sold off. BlackBerry stock closed down $1.79, or $17%, at $8.73 on the Toronto Stock Exchange.

 

In August, chief executive Thorsten Heins announced the formation of a special committee to examine the company’s “strategic alternatives.” Such alternatives could include a joint venture, a move to go private or an outright sale. The committee is still evaluating its options, according to a statement from the company.

SAUL LOEB/AFP/Getty ImagesThe inventory writedown is mostly based on the value of Z10 touch-screen devices, the company said.

 

In a surprise move, the company announced a restructuring of its smartphone portfolio from six devices to four, with two high end and two-entry level phones. BlackBerry’s flagship Z10 device – which was used to launch its revamped BlackBerry 10 platform – will be “re-tiered” as an entry-level device, alongside the company’s recently announced Q5. The BlackBerry Z30 – a new, 5″ smartphone announced this week – and the Q10 with QWERTY physical keyboard, released in April, in will be considered the company’s high-end phones.

BlackBerry sold about 5.9 million smartphones in the second quarter, it said, down from 6.8 million in the quarter previous. It also anticipates $1.6-billion in revenue – with service revenue, generated primarily by 3.7 million legacy BlackBerry 7 devices, accounting for about half of that figure.
“The revenue and device shipment numbers are pretty surprising given how weak it is. I think many of us were expecting a pretty difficult quarter, but this much worse than we anticipated,” said UBS Research analyst Amitabh Passi.

BlackBerry also announced plans to reduce operating expenses by approximately 50% by the end of Q1 FY2015. The company is expected to report $2.6-billion in cash, and no debt.

The adjusted second-quarter net loss will be as much as US$265-million, more than triple the loss expected by analysts.

But amid all of the company’s early financial disclosures, an update on its ongoing pursuit for a saviour was nowhere to be seen.

BlackBerry is due to report second-quarter earnings on Friday, Sept. 27.