Ontario-based BlackBerry Ltd. confirmed on Friday that it will reduce its global workforce of around 4,500, or 40 percent, by the end of its first quarter in fiscal 2015. That will leave the company with approximately 7,000 full-time workers worldwide. The news arrives by way of BlackBerry's preliminary second quarter fiscal 2014 results revealing a staggering near $1 billion USD loss during the quarter partially due to a write-off of unsold BlackBerry phones, and partially due to payments to manufacturers and suppliers to halt production.
In addition to reducing its workforce, BlackBerry also plans to increase profit by reducing its future portfolio of smartphone from six to four. This portfolio will focus on enterprise and non-mainstream professional consumer (prosumer) devices, including 2 high-end devices and 2 entry-level devices in all-touch and QWERTY models. The BlackBerry Z10 phone will thus be re-tiered as an entry-level device and the BlackBerry Z30 as a high-tier device.
As part of the preliminary second quarter fiscal 2014 results, the company halted trading of its shares on Friday. BlackBerry said it also expects to report on September 27 revenue of approximately $1.6 billion, and total unit sales during the quarter of approximately 3.7 million smartphones -- Apple sold 31.2 million iPhones during its last quarter. The company will also report cash equivalents and investments of approximately $2.6 billion, meaning the company used around $500 million of its saved cash during that quarter.
"Most of the units recognized are BlackBerry 7 devices, in part because certain BlackBerry 10 devices that were shipped in the quarter will not be recognized until those devices are sold through to end customers," the company said. "During the second quarter, approximately 5.9 million BlackBerry smartphones were sold through to end customers, which included shipments made prior to the second quarter and which reduced the Company's inventory in channel."
Seemingly echoing Microsoft's own financial hit thanks to unsold Surface RT tablets, BlackBerry said it is taking a financial hit of its own in the second quarter of $930 million to $960 million thanks mostly to unsold BlackBerry Z10 devices. The quarter also includes a pre-tax restructuring charge in the approximate amount of $72 million reflecting ongoing cost efficiency initiatives.
There's speculation that this may be the end of BlackBerry. At one time the company owned 51 percent of the smartphone market, but when BlackBerry introduced its new Z30 smartphone and updated BlackBerry 10.2 OS, most consumers and the media barely noticed. Instead of following Apple's lead in the late 2000's and going all-touch, the company chose to stick with its small screens and QWERTY keyboards. Now the company is trying to catch up with its new line of BlackBerry 10 devices, and it may just be too late to gain any traction.
Even more, in reducing its workforce by 40 percent, BlackBerry may no longer have the manpower for extensive research and development. "The biggest problem is that they won't have money for R&D and that's death for a tech company," said Neeraj Monga, an analyst at Veritas Investment Research in Toronto. "It's not like Coca-Cola, which has been able to bottle the same formula for over 100 years."
The company said on Friday that the Special Committee of the Board continues to evaluate strategic alternatives. BlackBerry formed this special committee last month to evaluate the company's alternatives again, including possible joint ventures, strategic partnerships or alliances, a sale of the company or other possible transactions. JP Morgan Securities LLC is serving as financial advisor to BlackBerry and Skadden, Arps, Slate, Meagher & Flom LLP and Torys LLP are serving as legal advisors.
BlackBerry shares fell more than 17 percent to $8.72 per share by the closing bell on Friday.
Kevin Parrish is a contributing editor and writer for Tom's Hardware,Tom's Games and Tom's Guide. He's also a graphic artist, CAD operator and network administrator.
See here for all of Kevin's Tom's IT Pro articles.