Blackberry to cut 40% of its workforce

Blackberry announced that it will cut 40% of its workforce globally, i.e. 4,500 jobs, in an attempt to reduce its huge losses. Second quarter losses for 2013 are expected to reach nearly one billion dollars ($995 million).

In a press release yesterday, Blackberry announced that the “company expects GAAP net operating loss of approximately $950 million to $995 million; loss includes a primarily non-cash, pre-tax inventory charge of approximately $930 million to $960 million resulting from the increasingly competitive business environment impacting BlackBerry smartphone volumes, and a pre-tax restructuring charge of $72 million.”

After its announcement yesterday, shares in Blackberry were briefly halted. By the end of the day the company’s share price had dropped 17%.

Thorstein Heins, chief executive of Blackberry, said yesterday “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. 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.”

The company’s new Z10 model smartphone, which was released in January 2014 amidst much fanfare, has had disappointing sales, which Blackberry says contributed to its losses this year.

In an online communiqué, Blackberry wrote “As a consequence of the more intense competition the Company is experiencing in its hardware business, it expects to report a primarily non-cash, pre-tax charge against inventory and supply commitments in the second quarter of approximately $930 million to $960 million, which is primarily attributable to BlackBerry Z10 devices.”

Rather than opt for the new Z10, the majority of Blackberry enthusiasts decided to stay with their earlier models.

Last month Blackberry was contemplating a possible sale. Despite having a mountain of patents that should attract potential buyers, no company of any magnitude appeared interested.

In an interview with the BBC, Colin Gillis of BGC, said “The company has sailed off a cliff. This is the quarter where Blackberry as you used to know it is no longer.”

About Blackberry Limited

Initially called Research in Motion Limited, Blackberry Limited, based in Waterloo, Ontario, Canada, is a telecommunication and wireless equipment company. It is best known for developing the Blackberry brand of tablets and smartphones.

Research in Motion Limited was founded by Mike Lazaridis in 1984. He was Blackberry’s co-CEO with Jim Balsillie until January 2012. In August 2013, Thorsten Heins took over as the company’s CEO.

During most of this millennium, Blackberry has been in a growing and dominant position in the mobile phone market. Sales grew from $294 million in 2002, and reached a peak of $19,907 million ($19.907 billion) in 2011. In 2012, sales dropped to $18,508 million and then to $11,073 billion in 2013.

The number of active Blackberry subscribers, on the other had, has risen steadily since 2002, and have continued rising in 2011, 2012 and through 2013.