BlackBerry lost a whopping US$4.4-billion in the third quarter as it reported that its newest smartphones, once touted as the way it would reclaim a competitive position, are hardly selling at all.
The Waterloo, Ont.-based company said more than 74 per cent of the 4.3 million BlackBerry devices that landed in user’s hands during the quarter were its older BlackBerry 7 models, not the new BlackBerry 10 devices.
Those poor sales weighed on BlackBerry’s revenue which was $1.2 billion, down 56 per cent from a year ago when it didn’t have new smartphone models on the market. It also was $400 million lower than analyst estimates compiled by Thomson Reuters.
BlackBerry, which is in the midst of significant changes to how it operates, also recorded a number of items related to its restructuring efforts, and the company managed to increase its cash holdings to $3.2 billion at the end of November.
Adjusted losses from continuing operations, which filter out various expenses like restructuring costs, were $354 million, or 67 cents per share — also 23 cents below analyst estimates.
The details come as BlackBerry also announced plans to shift much of it hardware development to Chinese electronics maker Foxconn under a five-year agreement will begin with manufacturing a smartphone for Indonesia early next year.
It’s one of the many changes being made at BlackBerry under the leadership of chairman and interim CEO John Chen as he tries to reshape the struggling company.
BlackBerry said Foxconn will help develop new models and manage the inventory with operations based in Mexico and Indonesia.
In pre-market trade, BlackBerry’s battered shares fell 45 cents or 7.2 per cent to $5.80 after the earnings report.
A year ago, BlackBerry had a small profit of $14 million, or three cents per share, under standard accounting and $2.7 billion of revenue. Analysts expected BlackBerry adjusted loss would be 44 cents per share and its revenue would be about $1.6 billion.
Since Chen joined BlackBerry last month, replacing BlackBerry CEO Thorsten Heins, he has started a dramatic overhaul of its executive ranks and begun fresh efforts to turn around the company.
“With the operational and organizational 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,” Chen said in a statement.
He said parts of BlackBerry’s business, including its enterprise services for organizations and its messaging products, are in good shape. He said the most immediate challenge is to improve its devices operations.
“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,” Chen said.
“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.”
Chen says the partnership with Foxconn demonstrates BlackBerry’s commitment to making devices over the long term.
There has been speculation that BlackBerry could get out of the device business in light of intense competition from Apple, Samsung and other smartphone makers.
For many people, Foxconn is best known as one of Apple’s main suppliers.
“BlackBerry is an iconic brand with great technology and a loyal international fan base,” said Terry Gou, Foxconn’s founder and chairman.
“We are pleased to be working with BlackBerry as it positions itself for future growth and we look forward to a successful strategic partnership in which Foxconn will jointly develop and manufacture new BlackBerry devices in both Indonesia and Mexico for new and existing markets.”
With files from David Paddon in Toronto