BlackBerry slashes jobs in face of $1B 2-qtr loss


07:54 AM September 21st, 2013


In this Tuesday, July 9, 2013, file photo, pedestrians walk near BlackBerry’s headquarters in Waterloo, Ontario, on the morning of the company’s Annual General Meeting. BlackBerry said Friday, Sept. 20, 2013, it will lay off 4,500 employees, or 40 percent of its global workforce, and is announcing a nearly $1 billion second-quarter loss in a surprise early release of earnings. AP

TORONTO — It was once so addictive it inspired the nickname “CrackBerry.” President Barack Obama confessed to being among the millions of devotees who couldn’t bear to stop tapping feverishly away on its tiny keyboard. Madonna once said she slept with hers under her pillow.

Then came the iPhone.

Users newly addicted to Facebook and photo-sharing and Angry Birds started flirting with the opposition. And as more smartphones flooded the market with their supersize Samsung screens and thousands of apps, the BlackBerry failed to keep up with the flash.

This year’s launch of BlackBerry 10, its revamped operating system, and fancier new devices — the touchscreen Z10 and Q10 for keyboard loyalists — was supposed to rejuvenate the brand and lure customers. But the much-delayed phones have failed to turn the company around. At their peak in the fall of 2009, BlackBerry’s smartphones enjoyed global market share of over 20 percent, says Mike Walkley, an analyst with Canaccord Genuity. Their piece of the pie has since evaporated to just 1.5 percent.

Now the company says it will lay off 4,500 employees, or 40 percent of its global workforce, as it tries to slash costs by 50 percent and shift its focus back to competing mainly for the business customers most loyal to its brand. A week earlier than expected, BlackBerry surprised the market by reporting Friday that it lost nearly $1 billion in the second quarter. It’s booking over $900 million in charges to write down the value of its glut of unsold smartphones.

Shares were halted pending the news. They plunged as low as $8.01 when the stock reopened for trading, before closing down 17 percent at $8.72.

“This is the end of the BlackBerry as we know it,” BGC analyst Colin Gillis said from New York. “This is a major pivot. They are cutting half of their employees and they’re going to focus on becoming a niche player focused on the enterprise.”

Gillis said he doesn’t expect to see a BlackBerry advertisement on television again.

He said they might be more interesting for a prospective buyer, though, now that that they’ve announced the restructuring. Gillis thinks it’s possible that BlackBerry could survive as a much smaller player. At the end of the second quarter, the company had total cash and investments of about $2.6 billion and no debt.

“That’s probably the feedback they’ve been getting. They don’t do all this if you have a buyer lined up,” Gillis said. “Some of the actions may have been driven by feedback by potential buyers down the road. Nobody wants to come in and buy the company and hold an all hands meeting and say, ‘By the way, half of you are fired.'”

Gillis said he can’t understand why BlackBerry would release the earnings late Friday, a week early. “That’s abysmal,” he said. “Did you really need to do it 3:15 p.m. on a Friday? Couldn’t you have just waited a week or done it Monday morning?”

BlackBerry had been scheduled to release earnings next week. But the Waterloo, Ontario company surprised the market late Friday afternoon by announcing that it expects to post a staggering loss of $950 million to $995 million for the quarter, including a massive $930 million to $960 million write-down of the value of its inventory. Revenue of $1.6 billion is only about half of the $3 billion that analysts expected, according to FactSet. The company’s expected adjusted loss of 47 cents to 51 cents per share falls far below the loss of 16 cents per share projected by Wall Street.

BlackBerry said it wants to slash operating costs in half by the first quarter of 2015 so cutting its global headcount to 7,000 total employees is necessary. The company let 5,000 people go last year.

“We are implementing the difficult, but necessary operational changes announced today to address our position in a maturing and more competitive industry, and to drive the company toward profitability,” Thorsten Heins, President and CEO of BlackBerry, said in a statement.

BlackBerry said last month that it would consider selling itself. The company reiterated Friday that a special committee of its board of directors continues to evaluate all options. The company said it plans to focus on offering only two high-end devices and two entry-level handsets going forward, with emphasis on the business market.

“Going forward, we plan to refocus our offering on our end-to-end solution of hardware, software and services for enterprises and the productive, professional end user,” said Heins. “This puts us squarely on target with the customers that helped build BlackBerry into the leading brand today for enterprise security, manageability and reliability.”

Blackberry, formerly known as RIM, was once Canada’s most valuable company with a market value of $83 billion in June 2008, but the stock has plummeted from over $140 share to less than $9. Its decline is evoking memories of Nortel, another Canadian tech giant, which ended up declaring bankruptcy in 2009.

Of BlackBerry’s remaining employees, thousands live in Waterloo, a university town 90 minutes’ drive from Toronto, where everyone seems to know someone who works for the company. Residents have said they’ve been talking about the company in hushed tones for the past few years.

“Our thoughts are with those who have lost their jobs at Blackberry, it is always a cause for concern for our Government,” Canadian Industry Minister James Moore said in a statement.

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  • JosengSisiw1

    Both Nokia & Blackberry committed the same mistake of ignoring the trend and sticking on their own old & rusty system. Nokia tried but it’s too late, and when they do, they wrongly choose another dying one, with Windows. Android could have been their savior but they choose to evaporate than to swallow their corporate pride.

  • indiosbravos2002

    The BBM and push email were a feature way advance of its time. It was way advance that 6-7 years ago I did not have any BBM contacts and my source of info about BB were theBB forums onshore. I always though this company is big and will even be bigger considering how they they thought of the functionality of the phone. And then they got lazy, stopped innovating and launching crappy products which did not have suplort. No apps.. no buyers.

  • indiosbravos2002

    When Blackberry announced it was banking its future on ONE phone model, the z10, we know they were in trouble.

  • NoWorryBHappy

    Like NOKIA, BLACKBERRY sat on their laurels.
    They were GIANTS and were well ahead of their peers a few years ago.
    This only proves that in the internet age, you can be up today and down tomorrow. Or gone tomorrow. The Philippines must LEARN FROM THE MISTAKES of these two very promising companies. We DO NOT have to experience their failures. We don’t have to be giants. BUT WE CAN STAND ON THE SHOULDERS OF GIANTS. We can learn from them. WE must STAY FOCUS and help our president move our country forward WITHOUT letup with the help of our OFWs, BSPs, flourishing and vibrant tourism, our recovering export industries. We must EXPOSE AND OPPOSE CORRUPTION even at the slightest sign it rears its ugly head. This is our chance, Let us not squander it. Failure is NOT an option.

  • nel

    Blackberry people are nuts. I hate their playbook. They should have just joined android and made good money. But instead they’ve made to their own crappy apps market. Nuts..even microsoft a far bigger company couldn’t do what they want to do. This company will die soon.

  • indiosbravos2002

    It will not be long before the company folds up. The Enterprise niche is a lost market. 6-7 years ago, BB might have monopoly on secured enterprise email technology but now even iphones have this capability.

    BB is a good example of a company who got lazy and complacent.

  • indiosbravos2002

    The Z10 was a good phone but even before it reached the shelves it was already an old phone with old features. A few months after its launch, the S4 was introduced and it definitely killed BB’s hopes.

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