Disaster Strikes BlackBerry—Huge Job Cuts, $1 Billion Net Loss

Dan Rowinski Author: Publish date: Section: Mobile Interaction count: 5

The other shoe has finally dropped for a smartphone pioneer.

BlackBerry Z10 BlackBerry Z10

Disaster has finally struck for smartphone pioneer BlackBerry.

Today, trading of BlackBerry's stock was halted with "news pending." That news turned out to be tragic: the company is reporting a net loss of $950 million for its last financial quarter and has confirmed that it is laying off 4,500 people, nearly 40% of its entire workforce. BlackBerry will have 7,000 jobs remaining after the cuts. The layoffs come as BlackBerry tries to reduce expenses by at least 50% heading into 2015. 

BlackBerry's announcement comes a week before it was supposed to give its latest quarterly earnings statement. BlackBerry has been treading water this year, hovering around $3 billion in quarterly revenue for the last two quarters with a marginal profit in the fourth quarter and a small loss last quarter of about $63 million. This quarter, the long-awaited disaster has finally brought BlackBerry to its knees with a whopping $1 billion in net losses as its BlackBerry 10 devices go unsold. BlackBerry said that it sold 3.7 million smartphones last quarter, most of which were its older BlackBerry 7 devices. 

BlackBerry revenue for the second fiscal quarter of 2014 was $1.6 billion, down from $3.1 billion in the first quarter. BlackBerry estimates that nearly half of that revenue is from services and not from its hardware division. BlackBerry said that its total amount of remaining cash (and cash equivalents) is $2.6 billion, down from $3.1 billion last quarter.

The news comes two days after BlackBerry announced a brand new flagship smartphone, the BlackBerry Z30. 

BlackBerry has failed to gain traction this year against its top competitors like Apple and manufacturers using the Android operating system like Samsung, LG and HTC. BlackBerry sold about 6 million smartphones in the last two quarters, with almost all of the models being BlackBerry's legacy devices and not its new BlackBerry 10 smartphones. BlackBerry is not alone in its struggle to remain profitable among smartphone manufacturers, as companies like HTC have also seen profits drop considerably in the last two years. Nokia, once the biggest cellphone manufacturer in the world, faced enough economic difficulty that it sold to Microsoft earlier this month for $7.2 billion.

If BlackBerry keeps on burning cash at its current rate, it will not be able to last past much past the beginning of 2014. Its consumer marketshare is invisible while its enterprise marketshare to large corporations and governments remains small, but steady. 

"Our enterprise business continues to reflect the trust that governments and businesses have placed in the BlackBerry platform," said BlackBerry CEO Thorsten Heins in a press release. "Security matters and enterprises know the gold standard in enterprise mobility is BlackBerry."

The BlackBerry Enterprise Server (BES 10) remains the company's only consistent division with 25,000 installs (up from 19,000 in July). The revenue from BES accounts for BlackBerry's "service" revenue that now makes up half of the company's cash flow.