BlackBerry ‘very disappointed’ in results as it pursues sale

Bloomberg NewsSeptember 27, 2013 

— BlackBerry CEO Thorsten Heins, who is trying to take the smartphone maker private in a $4.7 billion deal, said he was “very disappointed” in last quarter’s results as the company’s sales plunged, especially in the Americas.

The company released a more complete financial report Friday morning following a preliminary statement a week ago that didn’t provide regional breakdowns. Sales in the Americas, an area the company once dominated, fell faster than anywhere else, tumbling 56 percent to $610 million.

The report fleshed out last week’s figures, which showed a wider loss and an unexpectedly sharp revenue decline. The company also is taking a pretax write-down of $934 million for unsold phones and cut 4,500 jobs, or about a third of its workforce. BlackBerry said Friday that it would have $72 million in pretax expenses for restructuring.

“We are very disappointed with our operational and financial results this quarter and have announced a series of major changes to address the competitive hardware environment and our cost structure,” Heins said in Friday’s statement.

Heins is working to slash costs after a tepid response to the BlackBerry 10 lineup released this year. By going private, the company aims to tackle its challenges outside the glare of public markets. Fairfax Financial Holdings, BlackBerry’s largest investor, said on Sept. 23 that it had signed a tentative offer to purchase the company with help from other partners. The firm hasn’t identified the other buyers.

BlackBerry said Friday that it had a loss last quarter of 47 cents a share from continuing operations, excluding one-time costs. Last week, it said the loss would be 47 cents to 51 cents a share. While the final number is at the low end of that range, it’s still almost three times the size of the 16 cent per share loss originally predicted by analysts, according to data compiled by Bloomberg.

Total sales fell 45 percent to $1.57 billion, a little lower than the figure of $1.6 billion that BlackBerry gave last week. Analysts had estimated $3.03 billion.

Suppliers, corporate customers and wireless carriers have begun to loosen ties to the once-dominant smartphone company. Jabil Circuit Inc., an electronics supplier whose second-largest customer is BlackBerry, said this week it will probably disengage from that relationship in the coming months.

That’s a sign the smartphone company’s device business is shrinking, Peter Misek, an analyst at Jefferies Group LLC in New York, said in a report Friday.

“BlackBerry’s ongoing handset business will be much smaller and could even disappear,” said Misek, who has a hold rating on the shares.

The Jabil comments followed a move by T-Mobile US, the fourth-largest U.S. carrier, to begin removing BlackBerry inventory from its stores. While display models of the phones will still be on view, customers will have to get inventory shipped to them directly, T-Mobile said.

Credit Suisse Group AG, Switzerland’s second-biggest bank, has decided against adopting BlackBerry 10 for now, the company said in a statement. The lack of its compatibility with BlackBerry’s earlier platforms, the “dwindling albeit loyal population of BlackBerry users, and concerns about long-term viability, are causing us to pause and wait and see on any upgrades,” the Zurich-based bank said.

Faced with these challenges, BlackBerry agreed this week to Fairfax’s tentative offer, one Heins has yet to discuss publicly. BlackBerry canceled its customary post-earnings conference call Friday, meaning investors won’t get a chance to quiz Heins and his team about the takeover plan.

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