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It Keeps Getting Worse for Blackberry

It Keeps Getting Worse for Blackberry


It Keeps Getting Worse for Blackberry

It Keeps Getting Worse for BlackberryOTTAWA – Following one of the worst quarters in the company’s history, Blackberry (NASDAQ:BBRY) announced on Friday that the company will lay off nearly 40 percent of company’s already reduced workforce.  Some analysts fear that the cut is so deep that the company’s days as a smartphone maker are effectively over.

The announcement came after reports surfaced that Blackberry is expected to announce a quarterly loss of $ 1 billion next week.  The loss is mainly due to writing down inventory of unsold BlackBerry phones and penalty payments to halt production on phones on order from the company’s suppliers.  The company also announced that two of their six phone models would be discontinued.

‘They lost the handset war … its certainly a waving of the big while towel’ said James H. Gellert, the chairman and chief executive of Rapid Ratings, an investment risk evaluation firm.  Trading of the company’s shares were halted following the announcement which included news that fiscal second quarter revenues were almost half that of the previous year – $ 1.6 billion in 2013, compared to $ 3 billion in 2012.  In terms of units sold, during the same period, Blackberry managed to sell 3.7 million units while Apple (NASDAQ:AAPL) sold more than 21 million units.

Even more alarming was the company’s announcement that they had to dig into their cash reserves to fund operations in the quarter.  Going into the quarter Blackberry has close to $ 3 billion in cash reserves, but the company used roughly $ 500 million just to stay afloat.  Shares in the company tumbled 17 percent for the day, to $8.73; nearly all of it after trading was resumed.

In 2008, the company owned 51 percent of the smartphone market in North America, even President Obama kept his personal Blackberry after he took office.  However, the industry shifted dramatically after phones from Apple and Samsung (KS:005930) release more robust models.  According to Michael Gikas, the senior editor for electronics at Consumer Reports, ‘the rest of the smartphone world is racing ahead at top speed while we have BlackBerry stuttering to a stop.’

In an effort to catch up with Apple and Samsung, the company released the BlackBerry 10 line of phones.  However, it was too little too late, and the Blackberry 10’s were unable to break the grip that Apple and Samsung had on the market.  Similarly to Palm, the company that was once synonymous for personal digital assistants, it appears that Blackberry is destined to be broken up and sold for parts.  While some value remains, the company is a high-risk investment and should only be considered by the most experienced investors.

About Michael Reed

Michael Reed covers business and finance related news.

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