Devices pile up on the shelves, with worse yet to come
Disastrous Q2 results from smartphone pioneer BlackBerry appear to have reinforced reports that the manufacturer will be pulling out of the consumer market altogether, turning its remaining resources on software and services for corporations.
Last night’s trading update (27th September 2013) revealed a massive inventory of approximately $1.2 billion in unsold phones, a staggering $965 million loss and revenues for the period barely equating to $1.6 billion – almost half of what it achieved in the previous quarter.
Much of the loss was down to unwanted Z10 phones, the latest flagship devices which BlackBerry had hoped would restore its fortunes. A further $72 million in charges related largely to layoffs, as the Canadian further slimmed down its workforce. Yet despite the eye-watering losses, there are no signs of BlackBerry’s woes easing soon.
The Q2 revenue breakdown was based on estimated sales of 3.7 million Blackberry smartphones, mostly Blackberry 7 devices, but excluded the most recently released Blackberry 10 mobile devices as they will not be counted in profits until they are sold to consumers.
That breakdown should flow through in the next quarter.
The losses will place a question mark over the future standing of BlackBerry’s CEO Thorsten Heins who, back in July when Q1 figures looked less than impressive, pleaded for investors to be patient, insisting that he was still on track with the company’s turnaround strategy.
This time he merely responded to the second quarter figures through a statement saying, with no hint of irony, “We are very disappointed with our operational and financial results.”
Meanwhile BlackBerry’s turnaround – if there is one – could now be the wholesale dismantling of the Ontario manufacturer, with former director Prem Watsa so far revealed as the only suitor through his financial vehicle Fairfax Holdings.
But critics have already pointed out that while Fairfax already owns around 10 per cent of BlackBerry, Prem’s proposal to acquire it for $4.7 billion lacks one crucial ingredient – any mention of other investors willing to join him in the exercise.