BlackBerry plunges to $1bn deficit

Thousands will pay for Thorsten Heins's leadership with their jobs. Picture: Getty
Thousands will pay for Thorsten Heins's leadership with their jobs. Picture: Getty
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BlackBerry yesterday reported a quarterly loss of nearly $1 billion (£620m), underlining the woes which lie behind the bid from its largest shareholder to take it out of the public eye.

The loss included a write-down of about $934m for unsold Z10 phones, a touchscreen model that the company had hoped would reverse its fading fortunes. The phone has seen poor sales among business and consumer customers alike.

“This write-off is very real,” said Morningstar analyst Brian Colello. “They bought a lot of inventory hoping to sell it. The auditors were not convinced that BlackBerry can sell it or sell it at prices that the company was hoping for. We see no reason to be more optimistic than them.”

The telecoms giant, which had warned of poor results earlier this month, said its net loss for the second quarter was $965m, or $1.84 a share. Revenue fell 45 per cent to $1.6bn from a year earlier. Excluding the Z10 writedown and restructuring costs, losses were $248m.

The company plans to shed 4,500 jobs, or more than a third of its workforce, as it shrinks to focus on corporate and government customers.

It did not host a typical post-results call for investors to discuss the results yesterday after signing a tentative $9-a-share agreement to be acquired by a consortium led by Fairfax Financial, its largest shareholder, on Monday.

The Ontario-based company’s steep revenue decline and mounting losses have revived fears that BlackBerry, a pioneer in the smartphone sector, faces an ignominious death.

Chief executive Thorsten Heins said: “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.”

The company said it had sold 5.9 million mostly older-model phones in the quarter but only recognised revenue from 3.7 million, given that many sales had already been booked. By contrast, Apple sold nine million of its latest iPhone 5C and 5S models in the three days after launch.

Shares in BlackBerry remain far below Monday’s bid price indicating doubts that the Fairfax deal would be completed or a rival offer would emerge.

BlackBerry said last week it would no longer market its devices to consumers, instead focusing on the professional users that brought its first success and won the little devices the nickname “Crackberry” for their addictive nature.

That retreat from the consumer market has already had an impact. Telecom operator T-Mobile US said it would no longer stock the devices in its stores, instead shipping them to anyone who comes in to order a BlackBerry.

Sprint, one of T-Mobile’s rivals, will take a “wait-and-see” approach.

One of BlackBerry’s main contract manufacturers, Jabil Circuit, also said it probably would part ways with the company, its second-largest customer.

BlackBerry, formerly known as RIM, was once Canada’s most valuable company, with a market value of $83bn in June 2008. At their peak in autumn 2009, BlackBerry’s smartphones enjoyed global market share of more than 20 per cent which has evaporated to 1.5 per cent.