BlackBerry Quits on Consumer and 4,500 Workers

NEW YORK (TheStreet) -- BlackBerry , a pioneer of the smartphone, is ending its bid to take on Apple ,Google -Android and Microsoft consumer oriented devices, in a major restructuring of the company that will leave 40% of its workforce without a job.

Late on Friday, BlackBerry said in a pre-announcement of second quarter earnings that it will refocus on its enterprise users after falling far short of expectation on its handset sales. The announcement marks a stark change of course for BlackBerry, which kicked off the year by ending lucrative charges to telecom carriers for its IT services, in a bid to win over consumer smartphone users.

While BlackBerry's newest line of handsets such as its Z10 and its Q10 made it on Verizon and AT&T displays, the strategy backfired and left the company with about $2 billion in total unsold smartphone inventory that will now be written off.

BlackBerry said in the pre-announcement it expects second-quarter revenue to come in at $1.6 billion, or about half of consensus Wall Street estimates. Of that revenue, 50% is expected to come from BlackBerry's various IT and security services. Meanwhile, the company said it expects to record a second quarter inventory impairment of as much as $960 million as a result of a glut of unsold BlackBerry Z10 handsets.

Overall, the company forecasts a second quarter net loss of approximately $950 million to $995 million.

Along with the writedowns, BlackBerry also announced a major restructuring of its workforce. BlackBerry will lay off 4,500 workers, or 40% of the company's overall staff, and record a $72 million restructuring charge. The company is now also targeting a 50% reduction in its operating expenditure by the end of the first quarter of its fiscal 2015; a second major cost cutting initiative under CEO Thorsten Heins.

BlackBerry's restructuring will allow the company to refocus on its enterprise business and implies that the company will no longer chase after the non-professional smartphone user.

Written by: Antoine Gara 09/20/13 

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