September 27, 2013
BlackBerry is seeing a whole lot of red today — $965 million or $1.84 a share to be exact.
The amount seems astronomical compared to last year’s loss of $235 million, or 45 cents a share.
The struggling Canadian Smartphone maker’s second quarter report, released early this morning, was just as dismal as the company warned it would be with revenue falling 45 percent to $1.57 billion, from $2.86 billion a year ago.
One of the main reasons for the company’s substantial loss is the $934 million write-down in inventory of the BlackBerry Z10, the firm’s touchscreen device launched at the beginning of the year that BlackBerry hoped would propel the company into the third-place position in the Smartphone market behind powerhouses Samsung and Apple. Despite receiving good reviews, the company simply was not able to generate enough interest in the Z10 to entice consumers away from their iPhones and Galaxy devices.
“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 CEO Thorsten Heins in a statement.
BlackBerry’s disappointing results closely follow the company’s announcement that it will slash up to 40 percent of its workforce as it changes gears to focus on business customers rather than the average consumer.
“While our company goes through the necessary changes to create the best business 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 $2.6 billion in cash and no debt. We are focused on our targeted markets, and are committed to completing our transition quickly in order to establish a more focused and efficient company.
BlackBerry has seen an increasing penetration of BlackBerry Enterprise Service 10 (BES 10) with more than 25,000 commercial and test servers installed to date, up from 19,000 two months ago.
Aside from BlackBerry’s new focus, the company announced Monday it is to be acquired by Fairfax, its largest shareholder, for $4.7 billion. The letter of intent between the two companies indicates investors will receive $9 cash for each share. A definitive transaction agreement is to be finalized by Nov. 4.
Fairfax is putting a positive spin on the sale, listing the advantages of taking the company private.
“We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees,” said Fairfax founder and CEO Prem Watsa in a statement. “We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company.”
A billionaire investor, Watsa formerly served on BlackBerry’s board of directors and owns 10 percent of the company.
Jennifer Cowan is the Managing Editor for SiteProNews.