BlackBerry Ltd. expects to show a net operating loss next week amounting to as much as $995 million for the fiscal quarter that just ended, almost all of it from unsold inventory of its latest smart phone products. At the same time it admitted it is laying off thousands of staff, plunging revenue and acknowledged that handset sales dropped.
The Waterloo, Ont. device maker released a preliminary statement on its upcoming financials this afternoon, a week before its official quarterly results will be released on September 27 and amid news reports in the last 24 hours that it had to write off a huge amount of inventory.
Trading of its stock was halted just minutes before the press release was issued. When trading resumed, the price dropped from $10.80 a share when the day started to $9.08.
BlackBerry also announced a major restructuring that will ultimately see the layoff of 4,500 employees and reduction of its operating expenses by as much as 50 per cent by the end of the first quarter of 2015.
Canadian Industry Minister James Moore expressed sympathy for workers at BlackBerry upon learning that the company intended job cuts.
“Our thoughts are with those who have lost their jobs at BlackBerry, it is always a cause for concern for the government,” he said in a statement to the news agency Reuters.
The country’s economy is growing but there are still challenges ahead, he said.
A special committee of BlackBerry’s board of directors continues to evaluate strategic alternatives, the company said.
The company also noted that it still has no debt and still has over $2 billion in cash or cash equivalents.
The loss reported by BlackBerry includes a “primarily non-cash, pre-tax inventory charge of approximately $930 million to $960 million from the increasingly competitive business environment impacting BlackBerry smart phone volumes and a pre-tax restructuring charge of $72 million,” the company said.
It expects revenues for the second quarter to be approximately $1.6 billion. By comparison in the first quarter it had revenues of $3.1 billion.
The statement also issued confusing numbers on handset sales: It expects to recognize hardware revenue on 3.7 million smart phones — and most of them running the older BlackBerry 7 platform — although overall 5.9 million smart phones were shipped. However, revenue for some of the new BlackBerry 10 devices can’t be recognized in the quarter until they are actually sold. By comparison, BlackBerry shipped 6.8 million devices in the first quarter.
In the light of the developments, BlackBerry said it will cut down its smart phone portfolio from six devices to just four “focusing on the enterprise and prosumer-centric devices.”
The company said it sees increasing penetration of the BlackBerry Enterprise Service 10 (BES10) with more than 250,000 commercial and test servers installed up to date, up from 19,000 in July this year.
BlackBerry CEO Thorsten Heins hoped that the company’s new line of smart phones — the Z10, Q10, Q5 and the just announced Z30, which run on the new BlackBerry 10 operating system — would help reverse BlackBerry’s fortunes. However today’s announcements signals that BlackBerry recognizes that it is still an uphill battle.
The company said it expects to report a primarily non-cash, pre-tax charge against inventory and supply commitments in the second quarter of approximately $930 million to $960 million “which is primarily attributable to BlackBerry Z10 devices.”
“We are implementing the difficult, but necessary operational changes announced today to address our position in a maturing and more competitive industry, and to drive the company toward profitability,” Heins said in the statement. “Going forward, we plan to refocus our offering on our end-to-end solution of hardware, software and services for enterprises and the productive, professional end user. This puts us squarely on target with the customers that helped build BlackBerry into the leading brand today for enterprise security, manageability and reliability.”
(More details to follow)