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BlackBerry plans to slash 4,500 jobs
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It was once so addictive it inspired the nickname “CrackBerry.” US President Barack Obama confessed to being among the millions of devotees who couldn’t bear to stop tapping feverishly away on its tiny keyboard. Madonna once said she slept with hers under her pillow.
Then came the iPhone.
Users newly addicted to Facebook and photo-sharing and Angry Birds started flirting with the opposition. And as more smartphones flooded the market with their supersize Samsung screens and thousands of apps, the BlackBerry failed to keep up.
This year’s launch of BlackBerry 10, its revamped operating system, and fancier new devices — the touchscreen Z10 and Q10 for keyboard loyalists — was supposed to rejuvenate the brand and lure customers. But the much-delayed phones have failed to turn the company around. At their peak in the fall of 2009, BlackBerry’s smartphones enjoyed global market share of over 20 percent, says Mike Walkley, an analyst with Canaccord Genuity. Its share has since evaporated to just 1.5 percent.
Now the company says it will lay off 4,500 employees, or 40 percent of its global workforce, as it tries to slash costs by 50 percent and shift its focus back to competing mainly for the business customers most loyal to its brand. A week earlier than expected, BlackBerry surprised the market by reporting on Friday that it lost nearly US$1 billion in the second quarter. It’s booking over US$900 million in charges to write down the value of its unsold smartphones.
Shares were halted pending the news. They plunged as low as US$8.01 when the stock reopened for trading, before closing down 17 percent at US$8.72.
“This is the end of the BlackBerry as we know it,” BGC analyst Colin Gillis said from New York.
“This is a major pivot. They are cutting half of their employees and they’re going to focus on becoming a niche player focused on the enterprise.”
Gillis said he doesn’t expect to see a BlackBerry advertisement on television again. He said it might be more interesting for a prospective buyer, though, now that it has announced the restructuring. Gillis thinks it’s possible BlackBerry could survive as a much smaller player. At the end of the second quarter, the company had total cash and investments of about US$2.6 billion and no debt.
“That’s probably the feedback they’ve been getting. They don’t do all this if you have a buyer lined up,” Gillis said. “Some of the actions may have been driven by feedback by potential buyers down the road. Nobody wants to come in and buy the company and hold an all hands meeting and say, ‘By the way, half of you are fired.’”
The Waterloo, Ontario, company announced it expects to post a staggering loss of US$950 million to US$995 million for the quarter, including a massive US$930 million to US$960 million write-down of the value of its inventory. Revenue of US$1.6 billion is only about half of the US$3 billion analysts had expected, according to FactSet. The company’s expected adjusted loss of 47 US cents to 51 US cents per share falls far below the loss of 16 US cents per share projected by Wall Street.
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