BlackBerry Announces $1 Billion Write-Down, Cuts 4,500 Jobs

BlackBerry Announces $1 Billion Write-Down, Cuts 4,500 Jobs


Ailing smartphone maker BlackBerry (formerly Research In Motion—RIM) announced a lot of big numbers on Friday, and all of them were bad. The firm will take a nearly $1 billion write-down on unsold smartphone inventory and will cut 4,500 jobs, or 40 percent of its workforce. And it will restructure in a last-ditch bid to remain solvent, cutting its model lineup and focusing only on enterprise and prosumer customers.

"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," BlackBerry President and CEO Thorsten Heins said in a prepared 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 who helped build BlackBerry into the leading brand today for enterprise security, manageability, and reliability."

Heins' understandably positive reasoning notwithstanding, it's hard to put a positive spin on this news.

Related: "It's Over: BlackBerry Seeks Exit Strategy"

BlackBerry sold 3.7 million handsets in the most recent quarter, but nearly all of them were older BlackBerry 7 devices, not the BlackBerry 10 handsets the firm launched this year. The firm said it would recognize sales of the newer devices when they're sold through to customers. Meanwhile, it is taking a pre-tax inventory charge of $930 million to $960 million related to unsold BlackBerry 10 devices, plus a pre-tax restructuring charge of $72 million. It is expecting an operating loss of $950 million to $995 million for the most recent quarter.

BlackBerry is reducing its smartphone portfolio from six devices to four, which will include two high-end devices and two entry-level devices. It says it will focus on "enterprise and prosumer-centric devices" going forward.

The firm is cutting 4,500 jobs, or 40 percent of its job force, and hopes to reduce it operating expenditure by 50 percent as a result. And a Special Committee of the Board will continue to evaluate "strategic alternatives," which is code for selling the company wholly or piecemeal.

We'll know more by September 27, when the firm will deliver its most recent quarterly results. But it's not hard to imagine that Nokia would have suffered from this same fate had Microsoft not bailed it out. BlackBerry, alas, doesn't have such a deep-pocketed sugar daddy to save the day.

Related: "RIM Changes Its Name to BlackBerry, Announces New Handsets"

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