BlackBerry today announced shocking results for its third quarter of fiscal 2014, with huge operating losses and declining profits.
Revenue for the three months fell to $1.2bn, down 24% from the previous quarter and 56% from the same period last year.
The majority (53%) came from its services business, while 40% came from hardware. It sold 1.9 million smartphones in the quarter, but admitted most were BlackBerry 7-based devices, rather than handsets running its latest BlackBerry 10 operating system.
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Its software solutions – namely BlackBerry Enterprise Service 10 (BES 10) – which the firm has put so much stock in for its future, only accounted for 7% of revenues during the quarter, casting doubt on whether it will be enough to sustain the company going forward.
Operating loss for BlackBerry was an eye-watering $4.4bn, including a $2.7bn charge from writing off "long-lived assets", a $1.6bn charge from unsold inventory, and $266m from restructuring costs.
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“With the operational and organisational changes we have announced, BlackBerry has established a clear roadmap that will allow it to target a return to improved financial performance in the coming year,” said recently appointed CEO John Chen.
He claimed enterprise services and messaging were “well-positioned to compete”, but the most immediate challenge for BlackBerry was finding a way to make its devices business profitable.
“We have accomplished a lot in the past 45 days, but still have significant work ahead of us as we target improved financial performance next year,” said Chen.
“However, the company is financially strong, has a broad and trusted product portfolio to work with, a talented employee base and a new leadership team dedicated to implementing our new roadmap,” he added.
New directions for BlackBerry
One of the new directions BlackBerry is taking is to outsource its manufacturing, announcing a five-year deal with Foxconn to take over the building and responsibility of inventory for BlackBerry devices – although Chen admitted this was already in progress with previous management and he could not claim credit.
I come from an enterprise background and I am comfortable with engineering that way
John Chen, BlackBerry
There will also be joint development between the two firms, starting with a smartphone targeted at the Indonesian market in 2014 and built in Foxconn’s Mexico plant. However, Chen said BlackBerry designers in the US would focus on bringing enterprise handsets to market.
“For the foreseeable future our designers in North America will focus on enterprise handsets only,” he said during BlackBerry’s earnings call. “This does not imply that over the long term we are not going to get ourselves back into the consumer space, but until we get our finances back on a solid footing, that is what we are going to do.”
“For most of the other designs, I am going to rely on Foxconn. We already have an agreement…where they will be jointly developed – I hope them more hardware and us more software – and we will build it at their plant in Mexico for the Western market and developed world,” he said.
Chen was keen to emphasise during the call that he saw enterprise as the way forward, echoing his sentiments from an open letter he sent to customers earlier this month.
“I come from an enterprise background and I am comfortable with engineering that way,” he concluded. “BlackBerry is strong in cash, is no longer worried about whether we are going to be around… and now we are ready to fight back.”