BlackBerry ends write-off of a year with $4.4bn write-down

FoxConn deal means it moves to design


BlackBerry announced a whopping non-cash charge on its assets of $4.4bn in its earnings statement today. The company booked a loss of $354m on income of $1.2bn, the result of a continuing collapse in handset sales.

In Q2 this year BlackBerry lost $254m on sales of $1.6bn. BlackBerry will continue selling BlackBerrys, but much more cheaply: it announced a five year manufacturing deal with FoxConn and will focus on creating the software for the devices, and "iconic design".

2013 had been billed as the year of BlackBerry's comeback, as it introduced a shiny new OS and freed itself from the proprietary entanglements of the past. But the year ends with revenue that's down from $2.7bn in the same quarter last year. The company sold-through (as opposed to shipped into the channel) just 1.1 million BB10 devices and 3.2 million older BlackBerry smartphones in the quarter, compared to a sell-through of 8.4 million in the same period twelve months ago.

The $4.4bn figure is comprised of two impairment charges - which indicate a reduction in the company's capital - of $2.7bn and $1.6bn (less after tax) including inventory charges, and $266m for the ongoing cost reduction programme and the strategic review process.

That strategic review was expected to conclude with one of two things: either a partnership with a friendly, wealthier partner, or with the company going private. In the end neither happened and the continuing uncertainty made global headlines. This uncertainty surrounding this surely crippled sales.

BlackBerry's new chairman, Prem Watsa, injected almost $1bn of cash (by selling debt) into the company but at current burn rates it won't last the year. The Canadian pioneer has increased its cash pile however: it's now $3.2bn, up $0.6bn from Q2.

The problem is, shutting down the parts of BlackBerry that lose the most money is also expensive. Even extricating itself from contracts with suppliers for products nobody wants is expensive:

"Purchase obligations and commitments amounted to approximately $2.1 billion as at November 30, 2013, with purchase orders with contract manufacturers representing approximately $664 million of the total," the company noted.

On the positive side - and there isn't much of one - BBM now has 40 million users on Android and iOS. A little more good news should follow as it has made BES10, now maturing into a comprehensive product, much easier to adopt for existing BES owners.

Full statement is here. ®

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