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BlackBerry Turns To Enterprise, Prosumer Markets As Losses Mount

Waterloo, Canada – BlackBerry’s decision to focus on the enterprise and prosumer markets could give rivals a minor market-share boost given BlackBerry’s IDC-estimated 3 percent share of the North American consumer-smartphone market.

Announced on Friday when the company a record loss, it’s not certain whether BlackBerry will continue to offer smartphones through carrier stores and retailers to target the growing bring-your-own-device (BYOD) trend in which consumers connect their personal smartphones to an enterprise’s email and data servers. BlackBerry did not respond to inquiries in time for this post.

In Friday’s report, BlackBerry said it plans to cut its operating budget by about 50 percent by the end of the first quarter of fiscal 2015. The plans include a workforce reduction of about 4,500 positions or around 40 percent of the company’s global workforce, bringing the workforce roster down to about 7,000 full-time employees.

The company also announced that it expects to take a pre-tax primarily non-cash charge of $930 million to $960 million against inventory and supply commitments in its fiscal 2013 second quarter ending August. The write-down is due primarily to unsold full-touch Z10 smartphones, the company said. The company will also take pre-tax restructuring charge of about $72 million to reflect ongoing cost cuts.

As a result, the company expects to post a GAAP net loss for the second quarter of $950 million to $995 million, more than the $628 million that the company lost in its entire preceding 2013 fiscal year ending March 2. In its first quarter in fiscal 2014, the company posted a net loss of only $84 million.

 Before the inventory and restructuring charges, the company would have posted a net loss of about $250 million to $265 million, which would be up slightly from the year-ago net loss of $235 million.

Second-quarter revenues are estimated at about $1.6 billion, about half of which came from service revenues. The estimated second-quarter revenues would be down substantially from the year ago quarter’s $2.9 billion and down sequentially from a first-quarter $3.1 billion, which was up 9 percent year-over-year.

About half of second-quarter revenues came from services.

With the company planning to focus on what it calls “enterprise and prosumer-centric targeted devices,” the company will scale back its smartphone selection to two high-end devices and two entry-level devices, including all-touch and QWERTY models. With the launch of the 5-inch all-touch BlackBerry Z30, the company also said it would “ re-tier” the all-touch BlackBerry Z10 smartphone with a smaller screen “to make it available to a broader, entry-level audience.”

 A special committee of the company’s board of directors “continues to evaluate all strategic alternatives for the company,” BlackBerry noted.

Thorsten Heins, president/CEO, said, “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.”