BlackBerry reports US$965 million loss

It was a roller coaster week for BlackBerry Ltd. with the Canadian smart phone maker finally greeting Friday with an announcement that it lost US US$965 million in its second quarter and realized revenues of US$1.6 billion.

The loss included “a primarily non-cash, pre-tax charge against inventory and supply commitments of approximately $934 million (the “Z10 Inventory Charge”), and pre-tax restructuring charges of approximately $72 million related to the Coast Optimization and Resources Efficiency (CORE) program,” the BlackBerry statement said.

Today’s second quarter financial report was anticlimactic. BlackBerry had predicted just as much last Friday when it made an unanticipated announcement that it expected a net operating loss of as much as US$995 million, almost all of it from unsold inventory of its latest smart phone products.

This Thursday, BlackBerry also informed the media that the usual conference with analysts which accompanies the company’s quarterly financial reports was cancelled.

“We are very disappointed with our operational and financial results this quarter and have announced a series of major changes to address the competitive hardware environment and our cost structure,” said Thorsten Heins, BlackBerry CEO in statement released today.

Revenues for BlackBerry were down 45 per cent from the same period last year, according to the company. It booked sales of 3.7 million smart phones in the quarter which represents a drop of 74 per cent from the 14.5 million handsets BlackBerry sold in its best quarter about three years ago.

“While our company goes through the necessary changes to create the best model for our hardware business, we continue to see confidence from our customers through the increasing penetration of BES 10, where we now have more than 25,000 commercial and test servers installed to date, up from 19,000 in July 2013,” Heins said. “We understand how some of the activities we are going through create uncertainty, but we remain a financially strong company with $2.8 billion in cash and no debt.”

He said the company is focused on its target markets and is committed to completing its transition.

At least, Prem Watsa, chief of Fairfax Financial Holdings Ltd. thinks so too.

On Monday, two days after BlackBerry announced it expected a net operating loss of nearly $1 billion and planned to lay off 4,500 employees to cut cost, Watsa appeared as a white knight offering to take the company private and round up a consortium of investors to purchase it for US$9 per share or approximately US$4.7 billion.

By Wednesday, however, there were reports that Watsa was looking for more than US$1 billion in equity from investors for Fairfax’s planned purchase but he was encountering some difficulty convincing some Canadian and American pension and private equity funds. The report said that only the Ontario Teachers’ Pension Plan was seriously considering joining the planned takeover.

Then on Thursday, it was reported that Jabil Circuit Inc. one of BlackBerry’s smart phone suppliers for six years now, intended to end its partnership with the Waterloo, Ont.-based company.

Mark Mondello, Jabil CEO, said that his company is in discussion with BlackBerry to “wind down the relationship.”

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Nestor E. Arellano
Nestor E. Arellano
Toronto-based journalist specializing in technology and business news. Blogs and tweets on the latest tech trends and gadgets.

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