BlackBerry, a struggling maker of smartphones and a leading provider of secure messaging services, on Friday announced certain preliminary financial results for the three months ended August 31, 2013 and provided an update on business operations. The company reported nearly $1 billion in operating losses and unveiled plans to fire around 4500 employees. The main reason behind the problems is slow sales of devices based on BlackBerry 10 operating system.
BlackBerry currently expects to report revenue for the second quarter of approximately $1.6 billion, of which approximately 50% is expected to be service revenue. The company expects to report a primarily non-cash, pre-tax charge against inventory and supply commitments in the second quarter of approximately $930 million to $960 million, which is primarily attributable to BlackBerry Z10 devices.
For the second quarter of its fiscal year, the company expects to recognize hardware revenue on approximately 3.7 million BlackBerry smartphones. Most of the units recognized are BlackBerry 7 devices, in part because certain BlackBerry 10 devices that were shipped in the quarter will not be recognized until those devices are sold through to end customers. During the second quarter, approximately 5.9 million BlackBerry smartphones were sold through to end customers, which included shipments made prior to the second quarter and which reduced the company’s inventory in channel.
The company currently expects that its adjusted net loss, before giving effect to the inventory and restructuring provisions referred to above, will be in a range of approximately $250 million to $265 million, or $0.47 to $0.51 per diluted share. Including the inventory and restructuring provisions, the GAAP net loss is expected to be approximately $950 million to $995 million, or $1.81 to $1.90 per share. Adjusted gross margin is expected to be approximately 35% - 37%.
At the end of the second quarter, total cash, cash equivalents and investments is estimated to be approximately $2.6 billion. BlackBerry has no debt.
As part of the company’s focus on enhancing its financial results, and in response to the increasing competition in the smartphone market, BlackBerry also announced plans to transition its future smartphone portfolio from six devices to four. The portfolio will focus on enterprise and prosumer-centric targeted devices, including 2 high-end devices and 2 entry-level devices in all-touch and QWERTY models.
With the launch of the BlackBerry Z30 – the next generation high-tier smartphone built on the BlackBerry 10 platform – Blackberry will re-tier the BlackBerry Z10 smartphone to make it available to a broader, entry-level audience.
At the same time, the special committee of the company’s board of directors continues to evaluate all strategic alternatives for the company.
Restructuring Plans, Layoffs Incoming
BlackBerry also announced that it is targeting an approximate 50% reduction in operating expenditures by the end of the first quarter of fiscal 2015. As part of this, BlackBerry will implement a workforce reduction of approximately 4500 positions or approximately 40% of the company’s global workforce resulting in a total workforce of approximately 7,00 full-time global employees.
“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. 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,” said Thorsten Heins, president and chief executive officer of BlackBerry.