BlackBerry confirms 4,500 jobs cuts, slashes device portfolio

BlackBerry shares were halted on the Nasdaq stock exchange on Friday afternoon, ahead of news of massive job cuts.
Written by Zack Whittaker, Contributor
BlackBerry chief executive Thorsten Heins
Image: CNET

BlackBerry said late Friday afternoon that it will cut 4,500 jobs as the Canadian company continues to struggle in the face of steep competition in the mobile space.

The news follows earlier reports that the company was preparing to cut as much as 40 percent of its global workforce.

The smartphone maker said it will retain approximately 7,000 full-time employees around the globe as it attempts to generate traction for its next-generation mobile operating system, BlackBerry 10, and the devices that use it.

In guidance for its second fiscal quarter 2014, BlackBerry expects to lose $950 million to $995 million, or or $1.81 to $1.90 per share. 

The reason for the massive loss is due to a pre-tax charge of between $930 million and $960 million on inventory, "which is primarily attributable to BlackBerry Z10 devices," it says.

The company aims to cut its operating expenditures by 50 percent by 2015.

BlackBerry also said it would report second quarter revenue of $1.6 billion. Wall Street was expecting $3.03 billion. The company said it expects its cash reserve to drop from its first fiscal quarter of $3.1 billion down to $2.6 billion.

For the second quarter, BlackBerry expects to sell 3.7 million BlackBerry devices. However, most of these will be older devices running its two-year-old BlackBerry 7 operating system, it admitted.

To regain traction in the marketplace, the phone maker says it will reduce its portfolio from six BlackBerry 10 devices to four as it realigns its focus on the "enterprise and prosumer market." It will offer two high-end devices and two entry-level devices; the BlackBerry Z30, which launched this week, will occupy the "high-end" tier; the troubled Z10 will be reclassified to appeal to "a broader, entry-level audience."

The only silver lining in BlackBerry's announcement? The fact that the company is seeing increasing penetration of BlackBerry Enterprise Server 10. It now has more than 25,000 commercial and test servers installed to date, compared to 19,000 in July 2013, it said.

In prepared remarks, BlackBerry chief executive Thorsten Heins said the firm was implementing "the difficult, but necessary operational changes" in a bid to drive the smartphone maker towards profitability.

He added:

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.

Last month, BlackBerry announced that it had formed a special committee to evaluate a potential sale, which could include splitting up the company and selling parts off to various parties. In a statement issued today, the company's board of directors said "continues to evaluate all strategic alternatives for the company."

Shortly before the announcement, shares of BlackBerry ($BBRY) were halted on the Nasdaq stock exchange on "pending news" reports. BlackBerry was trading at $10.27 per share, down more than 2 percent, at the time of halted trading.

Shares plummeted by more than 20 percent following the news, wiping $1 billion off the company's value.

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Image: Google Finance
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