Winnipeg Free Press - PRINT EDITION

BlackBerry lays off 40% of workforce

Troubled smartphone maker cans 4,500

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TORONTO -- Poor sales of BlackBerry smartphones have forced the Canadian company to take a massive writedown for the devices and lay off 40 per cent of its global staff.

The Waterloo, Ont.-based company delivered the dismal job-cuts announcement Friday, marking one of the largest rounds of layoffs ever by a Canadian company.

It will affect 4,500 employees across BlackBerry's global operations, leaving about 7,000 in its workforce.

"From our perspective, this is a move made out of desperation," said Bill Kreher, a technology analyst with financial services firm Edward Jones. "The job cuts, while necessary, likely came way too late."

The smartphone maker has been struggling to maintain a notable share of the technology market in the face of growing competition from Apple, Samsung and others. But after the hyped launch of its new BlackBerry 10 operating system and new devices earlier this year, sales have failed to live up to expectations.

BlackBerry says it expects to post a loss of US$950 million to $995 million when it reports its second-quarter earnings next Friday. Most of that will come from a massive writedown of up to $960 million, primarily from poor sales of its BlackBerry Z10 touchscreen smartphones.

It will also book a $72-million restructuring charge related to changes in its operations, which include previous layoffs.

The company says job cuts will help it halve its operating costs by the end of May 2014. Earlier this week, BlackBerry dismissed reports of its plans to reduce its staff as rumours and speculation.

BlackBerry shares tumbled 16 per cent, or $1.74, to close at $9.08 on the Toronto Stock Exchange.

One of BlackBerry's strengths has been the massive amount of cash in its coffers that would help it weather the expensive launch of its new phones. However, the company has begun to eat into those savings, with cash on hand falling to $2.6 billion at the end of the second quarter, down from $3.1 billion in the previous quarter.

About 5.9 million BlackBerrys were sold to customers in the second quarter, but the company only recognized revenue on about 3.7 million of them, it said. A representative for the company did not respond to questions about where the remainder of the hardware revenue went, but the company had enthusiastically given away devices ahead of the launch.

BlackBerry management also continues to evaluate its strategic alternatives under a plan announced last month, which could include a sale of the company.

Chief executive Thorsten Heins called the latest announcement "difficult, but necessary" for the company. He said the company will refocus on professional smartphone users.

"This puts us squarely on target with the customers that helped build BlackBerry into the leading brand today for enterprise security, manageability and reliability," he said in a release.

BlackBerry also disclosed Friday it will simplify the number of phones it offers, reducing the portfolio to four devices from six. Half the lineup will be marketed towards higher-end consumers, while the other two will be for entry-level customers. The BlackBerry Z10 will be repurposed and marketed as an entry-level device under the plan, it said.

"We're now at a higher level and more urgency in terms of an acquisition and a deal ever since they announced the strategic review -- quite frankly ever since they had a dismal launch of BlackBerry 10," said Morningstar analyst Brian Colello. "The strategy and how this company will find its niche in the marketplace is certainly up in the air."

In the meantime, BlackBerry is pushing forward this weekend as it makes the popular BlackBerry Messenger chat application available for the Android operating system today and iPhones on Sunday.

Earlier this week, BlackBerry unveiled its latest device, a larger smartphone called the BlackBerry Z30, which serves as a midpoint between a phone and tablet. The Z30 comes with a five-inch screen, improved battery life and faster processor than the models released earlier this year.

 

-- The Canadian Press

 

Republished from the Winnipeg Free Press print edition September 21, 2013 B10

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