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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.

 

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  • DEVVVV

    Its not the Playbook itself that was the problem, It was QNX that built the software for it that was the mistake. I have a playbook tablet i bought at the reduced price, the hardware of the device i like, it has a good feel to it plus a very bright display and good features. But the OS was the problem. This is what hurt Blackberry, letting QNX build BB10. If all phone hardware designs are considered standard in the industry at this time, this leads me to believe its not the hardware’s fault its the QNX BB10 OS fault.

  • charlie2010

    re: according to industry analysts
    Are these the same analysts that also reported Blackberry was going out of business in 2011, 2012, 2013, 2014 and would be sold next month?
    I suspect they are the same. Do some real research next time, people like the Wall Street Journal are playing you for fools.

  • DEVVVV

    charlie i believe the industry analysts are giving BB the benefit of the doubt as it is. i think its a lot worst then there saying at this time. I tried telling you investors that the share price will drop below its lowest point in there history, no one wants to believe me. the reason BB put them selves up for sale is in the hopes of the stock rising high enough so FFH can get out with out a big loss. Blackberry’s only hope of survival is to launch the next generation smartphone device I have designed. Innovation is the only thing that will save Blackberry. The operating system that would run this new device had to be specifically designed to support it ((or at least BB10 would require updates)), due to its advanced technologies. I can’t believe that Blackberry would sooner die then explore this opportunity.