Beleaguered tech firm cuts 4,500 jobs

Canadian smartphone giant expected to post Q2 loss of $1 billion US next week

TORONTO With no buyers in sight, and a massive inventory of unsold phones, BlackBerry Ltd. will cut 4,500 jobs worldwide as executives seek to keep their company alive as it teeters on the brink of disaster.

The struggling Canadian smartphone maker also announced Friday that it expects to post a loss of nearly $1 billion US when the company reports its second-quarter earnings next week, citing “the increasingly competitive business environment impacting BlackBerry smartphone volumes.”

The move confirms an earlier report that the company had plans to reduce its workforce by up to 40 per cent by year’s end, as part of ongoing restructuring efforts.

For many Canadian investors, it is an eerie reminder of Nortel Networks’ last days, when plummeting sales, heavy writedowns and widespread layoffs sent the country’s last reigning tech giant into a free fall from which it was unable to recover.

“The company has sailed off a cliff. 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?” said BCG Partners analyst Colin Gillis.

BlackBerry has slashed more than 7,000 jobs since 2011, and hundreds more in recent months, as it struggles to compete with competitors such as Apple Inc., Google Inc. and even Microsoft Corp., whose smartphones and app ecosystems have proven more attractive to consumers — and even enterprise customers — than BlackBerry’s own.

“They’re trying to arrest their slide by cutting head count. I think that’s going to make it really difficult,” said Pacific Crest Securities analyst James Faucette. “There’s also some hope that by taking these steps right now, it helps cleans things up for any type of potential deal or acquisition that they’ve been very forthright about seeking.”

The Waterloo, Ont.-based company is also expected to write down as much as $960 million US in unsold inventory, based mostly on the severely diminished value of its Z10 touch-screen phone. It’s last three writedowns — a pre-tax expense of $485 million US in December 2011, a second charge of $267 million the following March and a third writedown of $335 million US in June 2012 — were attributed, in part, to the company’s similarly PlayBook tablet.

BlackBerry’s fate is inextricably tied to the success or failure of BlackBerry 10, the smartphone maker’s revamped mobile operating system, launched in January to much fanfare by chief executive officer Thorsten Heins.

Heins is planning to reduce his company’s total head count to 7,000 full-time employees worldwide as part of ongoing cuts. The company had 12,700 employees as of the end of March, the last time it has reported the size of its workforce.

Shares in the company plummeted as low as 24 per cent as investors reacted to the news and could have been much worse, had the company not already been trading below what many feel is the value of its cash and assets, assuming it is broken up and sold off.

BlackBerry stock closed down $1.74, or 16.08 per cent, at $9.08 on the Toronto Stock Exchange.

In August, Heins announced the formation of a special committee to examine the company’s “strategic alternatives.” Such alternatives could include a joint venture, a move to go private or an outright sale. The committee is still evaluating its options, according to a statement from the company.

In a surprise move, the company announced a restructuring of its smartphone portfolio from six devices to four, with two high end and two-entry level phones. BlackBerry’s flagship Z10 device — which was used to launch its revamped BlackBerry 10 platform — will be “re-tiered” as an entry-level device, alongside the company’s recently announced Q5.

The BlackBerry Z30 — a new, fiveinch smartphone announced this week — and the Q10 with QWERTY physical keyboard, released in April, in will be considered the company’s high-end phones.

BlackBerry sold about 5.9 million smartphones in the second quarter, it said, down from 6.8 million in the quarter previous.

BlackBerry is due to report secondquarter earnings on Friday, Sept. 27.