While BlackBerry's official earnings report won't be published for another week, they've released their preliminary Q2 2014 results, and it's not pretty at all. The company expects to take a loss surpassing the $900 million mark (closer to the $1 billion threshold) this quarter. Also, BlackBerry has been forced to cut 4,500 jobs which is definitely the most devastating news of all.
BlackBerry has also announced they will be reducing their smartphone portfolio from six devices to four: two high-end, and two low-end. With the upcoming release of the Z30, this has pretty much relegated the Z10 to an entry-level position along with the Q5.
BlackBerry also announced it will refocus its efforts in the enterprise space, while taking a step back from the consumer market to focus on what they call "prosumers." Not sure what that means exactly, but I'm guessing we'll find out soon.
For the ugly details, check out the press release below.
WATERLOO, ONTARIO--(Marketwired - September 20, 2013) - BlackBerry Limited (NASDAQ: BBRY)(TSX: BB) -
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
Company expects to report revenue for the second quarter of approximately $1.6 billion; recognizes sales of approximately 3.7 million smartphones in the second quarter
Company to refocus on enterprise and prosumer market, offering end-to-end solutions, including hardware, software and services
Future smartphone portfolio will transition from 6 devices to 4; focusing on enterprise and prosumer-centric devices, including 2 high-end devices and 2 entry-level devices
Company announces restructuring plans, including reduction of approximately 4,500 employees; targets reduction of its operating expenditures by approximately 50% by end of Q1 Fiscal 2015
Company sees increasing penetration of BlackBerry Enterprise Service 10 (BES 10) with more than 25,000 commercial and test servers installed to date, up from 19,000 in July 2013
Special Committee of the Board continues to evaluate strategic alternatives
BlackBerry Limited, a world leader in the mobile communications market, today announced certain preliminary financial results for the three months ended August 31, 2013 and provided an update on business operations.
Preliminary Second Quarter Fiscal 2014 Results
The Company currently expects to report revenue for the second quarter of approximately $1.6 billion, of which approximately 50% is expected to be service revenue. For the second quarter, the Company expects to recognize hardware revenue on approximately 3.7 million BlackBerry smartphones. Most of the units recognized are BlackBerry 7 devices, in part because certain BlackBerry 10 devices that were shipped in the quarter will not be recognized until those devices are sold through to end customers. During the second quarter, approximately 5.9 million BlackBerry smartphones were sold through to end customers, which included shipments made prior to the second quarter and which reduced the Company's inventory in channel.
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.
The current quarter will also include a pre-tax restructuring charge in the approximate amount of $72 million reflecting ongoing cost efficiency initiatives.
As previously disclosed, the Company anticipated generating an operating loss in the second quarter. The Company currently expects that its adjusted net loss, before giving effect to the inventory and restructuring provisions referred to above, will be in a range of approximately $250 million to $265 million, or $0.47 to $0.51 per diluted share. Including the inventory and restructuring provisions, the GAAP net loss is expected to be approximately $950 million to $995 million, or $1.81 to $1.90 per share. Adjusted gross margin is expected to be approximately 35-37 percent.
At the end of the second quarter, total cash, cash equivalents and investments is estimated to be approximately $2.6 billion. The Company has no debt.
The preliminary, unaudited information provided above is based on the Company's current estimate of results from operations for the second quarter of Fiscal 2014 and remains subject to change based on the Company's ongoing review of results, the subsequent occurrence or identification of events prior to closing of the review and any further adjustments made in connection with closing and review procedures. All figures in this release are in U.S. dollars and U.S. GAAP, except where otherwise indicated.
Operational Restructuring Designed to Enhance Financial Results
As part of the Company's focus on enhancing its financial results, and in response to the increasing competition in the smartphone market, BlackBerry also announced plans to transition its future smartphone portfolio from six devices to four. The portfolio will focus on enterprise and prosumer-centric targeted devices, including 2 high-end devices and 2 entry-level devices in all-touch and QWERTY models. With the launch of the BlackBerry Z30 - the next generation high-tier smartphone built on the BlackBerry 10 platform -- this week, the Company will re-tier the BlackBerry Z10 smartphone to make it available to a broader, entry-level audience. At the same time, the Special Committee of the Company's Board of Directors continues to evaluate all strategic alternatives for the Company.
Furthermore, the Company also announced that it is targeting an approximate 50% reduction in operating expenditures by the end of the first quarter of Fiscal 2015. As part of this, BlackBerry will implement a workforce reduction of approximately 4,500 positions or approximately 40% of the Company's global workforce resulting in a total workforce of approximately 7,000 full-time global employees.
Thorsten Heins, President and Chief Executive Officer of BlackBerry said, "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. This puts us squarely on target with the customers that helped build BlackBerry into the leading brand today for enterprise security, manageability and reliability."
The Company continues to see increasing penetration of BES 10 with more than 25,000 commercial and test servers installed to date, compared to 19,000 in July 2013.
"Our enterprise business continues to reflect the trust that governments and businesses have placed in the BlackBerry platform," added Heins. "Security matters and enterprises know the gold standard in enterprise mobility is BlackBerry."