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BlackBerry to cut 4,500 jobs as revival effort fails
Economics

BlackBerry to cut 4,500 jobs as revival effort fails

2 min. 21.09.2013 From our online archive
BlackBerry Friday said it would cut 4,500 jobs as the struggling Canadian smartphone maker retrenches in the face of hefty losses and weak sales of its new handsets.

(AFP) BlackBerry Friday said it would cut 4,500 jobs as the struggling Canadian smartphone maker retrenches in the face of hefty losses and weak sales of its new handsets.

The news, showing BlackBerry's efforts at reviving its fortunes a stunning failure, pushes the once high-flying firm one step closer to extinction, analysts said.

BlackBerry said it expects a loss of $950 to $995 million in second quarter mostly due to writedowns linked to poor sales of its Z10 smartphone, the device aimed at competing against Apple and Android devices.

The company's highly-publicized launch of the BlackBerry 10 platform earlier this year failed to ignite sales. The company has said it is examining "strategic alternatives," including a possible sale of the company.

Friday's news marks the latest downer for a company whose products were once nick-named "crackberries" because of the customer loyalty they fostered.

"The Blackberry of the past is dying and changing and going away," said technology analyst Jeff Kagan.

Kagan said only time will tell if BlackBerry vanishes completely or is reinvented, perhaps as part of another company.

Mark Sue, analyst at RBC Capital Markets said the results were "much worse than expected" and that the business "is facing significant challenges" and "trying to rapidly cut costs to reduce cash burn."

The job cuts constitute 40 percent of the company's workforce and will take staffing down to 7,000.

The loss in the upcoming quarter includes a $930 to $960 million charge resulting "from the increasingly competitive business environment impacting BlackBerry smartphone volumes" and a $72 million restructuring charge, the company said.

Revenues are projected at $1.6 billion, well below the $3.06 billion expected by analysts.

BlackBerry will cut its portfolio from six devices to four and expects to reduce its operating expenses by approximately 50 percent.

"We are implementing the difficult, but necessary operational changes announced today to address our position in a maturing and competitive industry, and to drive the company toward profitability," said chief executive Thorsten Heins.

The reorganization enables BlackBerry to scale back its sales ambitions and no longer aim to compete at the retail level with Samsung or Apple, said technology analyst Rob Enderle.

Apple Friday attracted swarms of customers in a dramatic global launch of its latest iPhones Friday that drew massive lines in Paris, New York, London and other cities.

"This buys them time," Enderle said. "It brings their costs down so that they can hold on longer waiting for that right buyer, that right (buyout) opportunity, or something else."

BlackBerry will aim to specialize not in the premium consumer market, but in the professional market, where security and speed of communications are more important than video games and other applications, Enderle said.

"In business, they still have a very loyal following," Enderle said of BlackBerry.

According to International Data Corporation (IDC), BlackBerry's global market share had slipped to 3.7 percent in the second quarter, the lowest since tracking began, while Google Android accounted for nearly 80 percent.

BlackBerry Friday said its special committee "continues to evaluate strategic alternatives."

The company announced in August that it had formed a committee to consider "possible joint ventures, strategic partnerships or alliances, a sale of the company or other possible transactions."

Some analysts have had trouble identifying potential suitors for BlackBerry, although social networking sites or online retailers like Amazon have been seen as possibilities. The company could also opt to go private, analysts said.

BlackBerry shares, which were suspended ahead of the news, closed 17.1 percent lower.