BlackBerry Plunges 17% After Reporting Job Cuts, $1B Potential Losses


BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) plummeted by 17% to $8.53 per share after releasing its preliminary second quarter fiscal 2014 financial results indicating its nearly $1 billion potential losses and plan to cut 4,500 jobs or 40% of its global workforce. The stock price of the Canadian smartphone manufacturer fell by 26% this year.

Based on BlackBerry’s financial statement, its new BlackBerry 10 devices failed to attract more consumers. The company sold 5.9 million smartphones compared with the 6.8 million units it sold in the previous quarter. BlackBerry expected to generate hardware revenues from approximately 3.7 million smartphones.

It is interesting to note that majority of the smartphones sold during the period were BlackBerry 7 devices. The Canadian smartphone manufacturer explained that certain BlackBerry 10 devices shipped during the quarter were not recognized until sold through to end customers.

BlackBerry said it would write down approximately $930 to $960 million non-cash, pre-tax charge against smartphones still in stock at carriers and retailers. Most of the unsold devices were BlackBerry Z10. The company would also write down $72 million pre-tax restructuring charge to reflect its ongoing cash efficiency initiative.

The Canadian smartphone manufacturer estimated that its adjusted net loss would be in the range of $250 million to $265 million or $0.47 to $0.51 per diluted share. Its GAAP net loss would be around $950 million to $ 995 million or $1.81 to $1.90 per share.

BlackBerry expected to end the quarter with $2.6 billion total cash, cash equivalents and investments. The company has no liabilities.

Due to strong competition in the smartphone market, BlackBerry decided to reduce its portfolio from six to four devices including 2-high end devices and 2-entry level in all touch and QWERTY models. The company said its devices would be enterprises and pro-consumer centric.

In a statement, BlackBerry CEO, Thorsten Heins said, “We are implementing the difficult, but necessary operational changes… to address our position in a maturing and more competitive industry, and to drive the company toward profitability.”

He said the company would refocus its business on end-to-end hardware, software, and services for enterprises and the productive, professional end user. Heins emphasized that BlackBerry’s BES 10 expanded from 19,000 commercial and test servers installed last July to more than 25,000 at present.

“Our enterprise business continues to reflect the trust that governments and businesses have placed in the BlackBerry platform. Security matters and enterprises know the gold standard in enterprise mobility is BlackBerry.”

Early this month, Peter Misek, managing director at investment banking firm Jefferies said that the Enterprise business is the crown jewel of BlackBerry. He pointed out that the networks of the company are “NSA proof.” Misek said,“It’s probably one of the only networks that is proof, and the security is so good, it takes four million years on brute compute force to hack it, so we think it’s a very valuable asset.”

BlackBerry is scheduled to report its actual financial results on September 27.