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BlackBerry cuts 40 per cent of staff, reports near $1 billion loss, slashes model lineup


Perhaps tiring of a death by a thousand cuts following days of reports of negative news leaking out from the Waterloo, Ont. smartphone company, BlackBerry halted trading late Friday afternoon and then pulled off the Band-Aid. And this one stung.

BlackBerry, which is due to report its full second quarter results next Friday, gave investors an early preview. The company expects a GAAP net operating loss of between $950 million and $985 million. Of that, $930 million to $960 million is non-cash, pre-tax inventory charge on the write-off of excess smartphone inventory. It will also lay off 4,500 employees worldwide, a cut of 40 per cent, leaving it with about 7,000 employees. And it will reduce its smartphone model lineup from six devices to four.

On the financials side, BlackBerry expects to report Q2 revenue of about $1.6 billion, of which about half is services revenue. The write-down eating into that revenue is primarily attributable to excess Z10 inventory. Without the write-down and other restructuring charges, BlackBerry expects an adjusted net loss of $250 million to $265 million. Blackberry notes that at the end of Q2, it has $2.6 billion in total cash, cash equivalents and investments, and no debt.

With the preview of the upcoming financials, BlackBerry also made several structural moves, including laying off about 40 per cent of its worldwide workforce. That will mean a workforce reduction of about 4,500 positions, leaving BlackBerry with about 7,000 full-time global employees. It’s part of a goal to reduce operating expenditures by 50 per cent by the beginning of fiscal 2015.

And on the device front, Blackberry said it will move its future smartphone portfolio from six devices to four: two high-end and two entry-level, two of them all-touch and two of them QWERTY models. The newly launched Z30 will be the high-end device, while the Z10 will be repositioned for the entry-level market. It’s unclear if the Q10 and Q5 will be the respective QWERTY models.

The company also signaled plans to focus on its traditional enterprise strength and abandon attempts to grow in the broader mass consumer market, saying its future portfolio will focus on enterprise and prosumer-centric targeted devices. This was backed-up by a statement from BlackBerry president and 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,” said Heins.

Finally, a sale or go-private move is still on the table, with BlackBerry saying the board’s special committee “continues to evaluate all strategic alternatives” for the company.