OTTAWA — At their peak, just a few years ago,
BlackBerry smartphones were symbols of corporate
and political power. When President Obama took
office he made keeping his BlackBerry a personal
priority, and when BlackBerry service had a hiccup
so did business on Wall Street.
But after being upstaged time and again by industry
rivals, the devices may soon remain only in
memories.
On Friday, BlackBerry announced that it would lay
off 4,500 employees, or nearly 40 percent of its
already reduced work force. The cut is so deep some
analysts and investors said that the company’s days
as a smartphone maker were effectively over.
The company also said that it expected to report a
quarterly loss of nearly $1 billion next week, mainly
the result of a write-off of unsold BlackBerry phones,
but also because of payments to stop manufacturers
and suppliers from adding to the pile. And of its six
phones that the company offers, two will be
discontinued.
“This is a recognition that they lost the handset
war,” said James H. Gellert, the chairman and chief
executive of Rapid Ratings, an investment risk
evaluation firm. “It’s certainly a waving of the big,
white towel.”
The company halted the trading of its shares to
make the bleak announcement. It also said that
revenue was expected to have been $1.6 billion in
the second quarter, almost half of the $3 billion
analysts had anticipated. Sales of phones during that
time, it said, totaled 3.7 million. Apple, by
comparison, sold 31.2 million iPhones during its last
quarter.
More alarming to many analysts was BlackBerry’s
announcement that it had used about $500 million in
cash to stay operating during the last quarter,
lowering its cash holdings to $2.6 billion. Although
the company has been losing market share for
several years, it had managed to increase its cash
holdings.
Shares in the company tumbled 17 percent for the
day, to $8.73, nearly all of it after trading was
resumed.
Four years ago, BlackBerry had 51 percent of the
North American smartphone market, according to
the research firm Gartner. But the fast-changing
industry, and in particular phones from Apple and
Samsung, left the company behind.
“The rest of the smartphone world is racing ahead at
top speed while we have BlackBerry stuttering to a
stop,” said Michael Gikas, the senior editor for
electronics at Consumer Reports.
BlackBerry’s executives initially looked down on the
move to making smartphones into pocket-size
computers, which was pioneered by Apple’s iPhone.
But consumers preferred smartphones with full
touch screens, multiple cameras and, most
important, hundreds of thousands of apps.
BlackBerry’s devices largely stayed the same, often
with half-screens and a physical keyboard, and its
initial attempts at touch-screen phones were
technological failures.
In January, the company introduced the BlackBerry
10 line of phones, which were based around an
entirely new operating system of the same name and
offered hardware features that were similar to
devices from the market leaders.
But the new devices were unable to break the grip of
Apple and Samsung. When the latest flagship phone
in the line, the Z30, was announced this week, it
caused hardly a ripple. Even BlackBerry seemed to
have given up. Unlike with other phones in the
series, the Z30 release came without any kind of
public or flashy demonstration.
The failure of the BlackBerry 10 line of phones
quickly led to speculation that the company, like
Palm before it, would be broken apart and perhaps
gradually disappear, at best lingering as little more
than a brand name. This summer, BlackBerry
announced that it was undertaking its second
strategic review in less than a year. Unlike with the
earlier one, however, BlackBerry’s executives did
not rule out a sale of the company.
All of the uncertainty surrounding the company,
several analysts said, probably made the company’s
problems even worse during the last quarter.
Corporate and government information technology
departments have held back on committing to
BlackBerry 10 phones and, more important for
BlackBerry, the corporate server software that
supports them.
Consumers are often less sensitive to corporate
problems. But Keith Lam, a managing partner at Red
Sky Capital Management in Toronto, said that
carriers appeared to be cutting back their
BlackBerry 10 inventory to avoid being saddled with
unwanted phones and reducing display space and
promotions for the devices in stores.
“From that it kind of snowballs downward for
BlackBerry,” said Mr. Lam, whose firm does not
manage any BlackBerry shares.
If, as many expect, BlackBerry is no longer in the
handset business, the question becomes what
remains of value to a potential investor.
Mike Lazaridis, the co-founder of BlackBerry who
stepped down as co-chief executive in 2011, has
contacted private equity firms about a possible bid
for the troubled company. But a private company
would be up against some of the largest companies
in the world, like Apple.
Even before Friday, many analysts had declared
BlackBerry’s hardware business to be worthless.
There is no clear consensus, however, on the value
of its other assets.
BlackBerry owns a secure global network that once
provided it with a selling point for customers seeking
security. But that highly centralized network is
prone to occasional failures, is based on aging
technology and has had its role reduced under
BlackBerry 10.
The value of the company’s patents, many of which it
holds in partnerships with other technology
companies, is also uncertain. The layoffs also
suggest that BlackBerry will be forced to give up
most of its research and development work, further
clouding its value.
“The biggest problem is that they won’t have money
for R.&. and that’s death for a tech company,” said
Neeraj Monga an analyst at Veritas Investment
Research in Toronto. “It’s not like Coca-Cola, which
has been able to bottle the same formula for over
100 years.”
mobile.nytimes.com/2013/09/21/technology/blackberry-plans-to-cut-4500-jobs.html?from=global.home

Bad market u say.