BlackBerry cuts 4500 jobs, loses nearly $1 billion in Q2

With over a third of its staff gone and with its stock continuing to drop, it looks like we're close to the end of BlackBerry.

Very bad news for BlackBerry. The Canadian smartphone maker posted a $995 million operating loss for the second quarter and will cut 4500 jobs - over a third of its staff - in a bid to cut costs.

The news comes moments after the company halted trading on its stock, which has been on a steady downward decline in the past several months.

Recent BlackBerry phones, like the Z10 and Q10, failed to catch on with consumers, and BlackBerry has been fighting a losing battle against Microsoft for the number three spot in the mobile market.

In light of the results, the company said it plans to restructure and lay off around 4500 staff and cut the number of phones it sells from six to four handsets. Those phones will be targeted at the enterprise and prosumer markets.

Statement from the CEO

"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, BlackBerry president and CEO, said in a statement.

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

Earlier this week, BlackBerry brought its popular BlackBerry Messenger service to both Android and iOS, giving people one less reason to choose a BlackBerry phone over the competition.

Heins has spent the last year shuttering BlackBerry operations across the globe in order to cut costs, so the massive staff layoffs aren't entirely surprising. According to a report by the Wall Street Journal Thursday, the company was preparing to cut up to 40 percent of its staff by year's end--though the news is still shocking.

As Android and iOS continue to gain ground and with Microsoft expected to announce a much-anticipated update to Windows Phone in the coming weeks, it seems like BlackBerry has crossed over to the point of no return.

The struggling smartphone maker quantified just how bad business is at the moment, as users abandon its once-dominant platform.

The company said it plans to record a GAAP net operating loss during the July to September quarter of almost $1 billion as it writes down an excess of Z10 smartphones that it failed to sell.

It expects sales for the quarter to be around $1.6 billion, a drop of 45 percent from the same quarter in 2012, the company said Friday.

It sold around 5.9 million handsets, but will only recognize revenue on 3.7 million phones as the remainder had already been shipped to dealers in a previous quarter.

Despite Heins' focus on the future, many in the industry wonder just how long the company will be able to survive in the cut-throat smartphone market.

The company has already said it's evaluating "strategic alternatives." That's often code for a breakup of a company or acquisition by a competitor.

Background

The BlackBerry 10 operating system came to market more than a year late at a time when many of its once-fanatical users had switched to rival platforms from Apple, Google, and Microsoft. Friday's statement doesn't do much to reassure current users and investors that BlackBerry will be able to turn itself around.

Canada's stock market regulator suspended trading in BlackBerry shares a few minutes before the company made its announcement. The stock plummeted when trading resumed, at one point losing almost a quarter of its value.

BlackBerry is scheduled to announced full financial results for the second quarter on Sept. 27.

Reaction

One of BlackBerry's biggest challenges now is giving consumers a compelling reason to go with the company's smartphone and tablet devices when more app-focused products like the iPhone and Android-powered devices also vie for their attention.

To compete, the company needs a larger app ecosystem to give users more of the same mobile services that are already available on iOS and Android, said Ramon Llamas, an industry analyst with IDC.

BlackBerry said it will shrink its smartphone lineup from six devices to four, with a focus on the enterprise and prosumer markets, but really the company should provide a broader portfolio of products with more features, Llamas said.

BlackBerry is targeting its new lineup of devices at the productive, professional end user. But with today's smartphones and tablets, "productivity is a given," Llamas said.

Independent telecom analyst Jack Gold said BlackBerry's sales for the quarter were almost half what he had been expecting.

"It's going to be very difficult for them to recover from this spiral," he said in an email. "You can cope with a big loss if sales are increasing. But with a loss and a sales downturn, things look dire."

"At this point, the shares are worth less than before, so it would be easier for someone to acquire them, but its not clear who that might be. They would essentially be buying the IP and installed base of customers. Also, it would be easier to go private, but again, who would fund it?"

Tags Blackberrybusiness issuesconsumer electronicsMicrosoftPhonessmartphones

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