UPDATE 4-BlackBerry warns of big loss, 4,500 job cuts; shares dive

Fri Sep 20, 2013 8:13pm EDT

By Euan Rocha
    TORONTO, Sept 20 (Reuters) - BlackBerry Ltd warned
on Friday it expects to report a huge quarterly operating loss
next week and that it will cut more than a third of its global
workforce, rekindling fears of the company's demise and sending
its shares into a tailspin. 
    The company, which has struggled to claw back market share
from the likes of Apple Inc's iPhone and Samsung
Electronics Co Ltd's Galaxy phones, said it expects
to report a net operating loss of between $950 million and $995
million in the quarter ended Aug. 31, due to writedowns and
other factors.
    The results will put more pressure on BlackBerry to find a
buyer for either some parts of the company, or for all of it. It
said last month it is weighing its options, including an
outright sale, in the face of persistently lackluster sales of
its new smartphones, which run on the BlackBerry 10 operating
system. 
    "The company has sailed off a cliff," said BGC Partners
analyst Colin Gillis. "What do you expect when you announce
you're up for sale? Who wants to commit to a platform that could
possibly be shut down?" 
    BlackBerry's Toronto-listed shares fell as much as 23.7
percent to C$8.25 on Friday, their lowest this year, before
closing down 16 percent at C$9.08. The company's Nasdaq-listed
shares ended 17 percent lower at $8.73, after falling as low as
$8.01.
    
    
    
    The company said it plans to shave its operating costs by
some 50 percent over the next nine months, as it aims to focus
its attention on the enterprise market and become a more niche
player. But some analysts are skeptical that the company can cut
its way back to prosperity. 
    "We believe the most likely outcome is a break-up or sale in
total or in parts," said UBS analyst Amitabh Passi.
    A source at a potential suitor said the warning on Friday
may speed up the sale process, but it also adds more risks.
    "I think most will view it as pretty scary. It's a melting
ice cube," said the source.   
    The Wall Street Journal, citing unnamed sources, on Friday
said the company's former head Mike Lazaridis has been talking
with private-equity firms about possibly mounting a joint bid
for the struggling smartphone maker.
    Lazaridis, who owns a 5.7 percent stake in the company, has
reached out to private equity firms that include the Blackstone
Group and Carlyle Group, said the report.
    Lazaridis was not immediately reachable for comment and
BlackBerry declined to comment.    
    
    BLACKBERRY 10 SALES WEAK 
    Waterloo, Ontario-based BlackBerry, once Canada's premier
technology company, said it expects to book a $930 million to
$960 million writedown in its fiscal second quarter owing to a
ballooning stockpile of unsold BlackBerry Z10 devices.
    The company had bet much of its future on the popularity of
the Z10 touchscreen device - the first of the smartphones to be
powered by its new BlackBerry 10 operating system. While the
device drew favorable reviews, it has failed to gain traction
among consumers since its introduction earlier this year.   
    For the second quarter, the company expects to have sold
about 3.7 million BlackBerry smartphones to end users.
BlackBerry said it is changing the way it accounts for device
sales, now booking revenue only after a device is sold to the
end customer, and not to carriers.
    Worryingly, most of the unit sales being recognized in the
quarter are older-generation BlackBerry 7 devices. The company
said it could not recognize BlackBerry 10 devices shipped in the
quarter until those devices are sold through to end customers.
That suggests carriers have been having difficulty moving the
new line of devices. 
    
    MAJOR JOB CUTS
    BlackBerry said it expects its adjusted net loss, before
giving effect to the inventory and restructuring provisions,
will be in a range of about $250 million to $265 million, or a
loss of 47 cents to 51 cents a share. 
    BlackBerry sees about $1.6 billion of revenue in the second
quarter, of which roughly 50 percent is expected to be revenue
from its services unit.
    Analysts, on average, had forecast a loss of 15 cents a
share on revenue of $3.06 billion, according to Thomson Reuters
I/B/E/S.
    "The revenue and device shipment numbers are pretty
surprising given how weak it is," said UBS analyst Passi. "I
think many of us were expecting a pretty difficult quarter, but
this is much worse than we anticipated." 
    The company, which had warned that job cuts were in the
offing, plans to shed 4,500 jobs. BlackBerry has already
undergone a major round of job cuts over the last 12 months. It
employed 12,700 people as of March, and once had close to 20,000
employees. 
    BlackBerry said its cash position as of the end of the
fiscal second quarter is estimated to be about $2.6 billion,
down from about $3.1 billion three months earlier. 
    "It makes it even more difficult for somebody to step in and
buy the company. If you look at what's been happening, they've
burnt through approximately half a billion dollars in cash in
the last three months," said Veritas Investment Research analyst
Neeraj Monga.
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