BlackBerry to cut 4,500 jobs, reports almost US$1bn operating loss

21 Sep 2013

The writing was on the wall as far back as 2007, when BlackBerry’s then-management team blithely dismissed the arrival of Apple’s iPhone. And so as Apple’s CEO Tim Cook responded to “incredible” demand for the latest iPhone models by personally greeting buyers in Palo Alto, California, stores yesterday, BlackBerry announced it was cutting 40pc of its workforce – 4,500 people – and reported operating losses of US$950m.

The Canadian firm which played a defining role in unleashing the smartphone revolution expects revenues for the second quarter of US$1.6bn on sales of only 3.7m smartphones in the second quarter.

It expects a net operating loss of US$950m to US$995m, including charges of between US$930m to US$960m due to a “competitive business environment.”

To survive BlackBerry is embarking on a pivot in the direction of the enterprise market, offering end-to-end software and services solutions to businesses.

As well as this it is reducing the number of devices in its portfolio from six down to four enterprise and “prosumer” devices, including two high-end devices and two entry level devices.

The plan is to make the BlackBerry Z10 smartphone available to a broader, entry-level audience.

The move makes sense because at least on the corporate front BlackBerry is seeing increasing penetration of BlackBerry Enterprise Service 10 (BES 10) with commercial and test servers installed to date reaching 25,000, up from 19,000 in July.

Importantly for BlackBerry, once known as Research In Motion, the company has no debt and has US$2.6bn of cash in the bank.

In a bid to right itself BlackBerry is aiming to reduce operating expenditure by 50pc, including a reduction of 4,500 workers – 40pc of its global workforce – resulting in 7,000 remaining 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,” said CEO Thorsten Heins.

“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.”

“Our enterprise business continues to reflect the trust that governments and businesses have placed in the BlackBerry platform,” added Heins. “Security matters and enterprises know the gold standard in enterprise mobility is BlackBerry.”

What Heins is saying is that BlackBerry has a future as a specialised provider of smartphone and enterprise services but won’t be dominating the food chain as it once had. That said, making decent devices like the Z10 available to a broader, entry-level audience also suggests BlackBerry hasn’t given up the ghost yet.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years