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BlackBerry admits to poor take-up of BES 10

Bryan Glick

BlackBerry has admitted that sales of its core product for business users – BlackBerry Enterprise Service 10 (BES 10) - have failed to live up to expectations.

In a filing to the US Securities and Exchange Commission (SEC) following its latest financial results last week, the smartphone maker said that slow take-up of BES 10 was a contributory factor in a $965m loss for its second fiscal quarter.

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“Delays in the launch of certain functionality of the BES 10 platform and alternative competitor products in the market have resulted in a slower-than-anticipated rate of adoption of the BES 10 platform by enterprise customers, many of which look to deploy BlackBerry 10 hardware and software simultaneously to optimise security,” said the statement to the SEC.

This slow adoption of BES 10 contributed to a $934m write-off made due to unsold inventory of the flagship Z10 smartphone, launched earlier this year.

In the financial results last week, CEO Thorsten Heins had talked up the progress made by BES 10.

“We continue to see confidence from our customers through the increasing penetration of BES 10, where we now have more than 25,000 commercial and test servers installed to date, up from 19,000 in July 2013,” he said.

But the latest information suggests that those figures were a lot less than BlackBerry hoped for.

The company also admitted that it has struggled to cope with the growing trend for bring your own device (BYOD) policies among its corporate customers.

“The company has encountered challenges adapting to the BYOD movement as some IT departments that previously required employees to use the BlackBerry wireless solution because of its emphasis on security and reliability are permitting employees to choose devices offered by the company’s competitors, who are increasingly promoting the merits of their own security and reliability, and this has impacted the company’s enterprise subscriber account base,” said the SEC filing.

Last week's financial results revealed that the supplier's sales dropped by half in just three months

The uncertainty caused by BlackBerry’s announcement that the firm is up for sale – and the subsequent bid by Canadian investment firm Fairfax Financial Holdings – has affected customer confidence in its future prospects.

“The company also believes that uncertainty surrounding its ongoing strategic review process may have negatively impacted demand for the company’s products in the second quarter of fiscal 2014,” said the filing.

BlackBerry executives are currently engaged in a round of customer briefings intended to reassure corporate IT buyers.

Last week’s financial results revealed that the supplier’s sales dropped by half in just three months. BlackBerry is cutting 4,500 jobs worldwide – 40% of its workforce.

Reports today suggest that a second prospective buyer has emerged – Cerberus Capital Management, a private equity firm that specialises in acquiring troubled companies, is also in early discussions with BlackBerry, according to the Wall Street Journal.


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