Unsold smart phones amounting to nearly $1 billion could prompt BlackBerry Ltd. to declare a major writedown when the company posts its earning next Friday, according to industry analysts.
According to BlackBerry its inventory of unsold smart phones has grown by 47 per cent in the June quarter. The figure raises the company’s inventory to $887 million.
“The presence of a bulging inventory adds another wrinkle on the plans of BlackBerry to turn around its fortunes and will certainly impact a potential sale of the company,” said Carmi Levy, Toronto-based independent technology analyst.
A writedown will reduce net income for the company and indicate that its BlackBerry 10 mobile operating systems, was not been able to produce the turnaround BlackBerry had expected.
Levy also said that the series of bad news regarding BlackBerry such as recent reports of workforce reductions, are overshadowing the company’s product releases and affecting sales of these products.
Depending on how much BlackBerry has spent in manufacturing the phone, the Canadian company may be in for another writedown, according to Brian Huen, managing partner of assets managements firm Red Sky Capital Management in Toronto. BlackBerry’s announcement earlier this year that it is open to takeover bids has scared off many phone buyers, he said.
If that happens, it will be the fourth writedown in two years for BlackBerry, according to online financial publications Bloomberg.com.
In December 2011, BlackBerry took a pretax expense of $485 million due in part to the lack of public interest in its PlayBook tablet device. In March the following year, the company took a second charge of $267 million and two months later reported a third writedown amounting to $335 million.
The company has been dogged by bad news in recent months.
Earlier this week, on the day it launched its latest smart phone the Z30, there were also reports that BlackBerry was preparing to lay off 40 per cent of its global workforce.
Analysts are predicting sales of $3.03 billion on average when BlackBerry reports it fiscal second quarter results on the Toronto Stock Exchange and Nasdaq Stock Market on September 27.That would mean in increase of 5.5 per cent from last year but down 1.3 per cent from the previous quarter. Analyst project BlackBerry will post a loss of 16 cents a share.
Levy said among the options now available to BlackBerry if sluggish sales continue, is to hold a fire sale of its smart phone inventory just as it did with the PlayBook.
“Their option is to ship the products to newer markets such as Malaysia, China, India, Thailand, the Middle or Eastern Europe,” he said.