OLD Media Moves

Blackberry still trying to stay relevant

September 23, 2013

Posted by Liz Hester

Blackberry is struggling to stay relevant as it loses ground to Apple and other smartphones, especially in the business market where it once held a near monopoly. Covering a businesses reinvention is always interesting, especially as the technology company struggles to keep customers. Often once customers make the switch, they don’t want to come back.

The Wall Street Journal wrote this story:

BlackBerry Ltd. begins life this week as a company focused on selling smartphone services to businesses, a risky, last-ditch bet that it can hang on to rapidly eroding ground in the market it pioneered.

The plan appears to be to position the company as the go-to provider of systems to manage smartphone use for employers like the government and banks, where the need to ensure security is at a premium.

That approach plays to the company’s strengths in markets where it has suffered the least damage, but BlackBerry’s position in the business market has eroded greatly amid gains by devices like Apple Inc.’s iPhone. It also faces tough competition from startups and established rivals like Microsoft Corp.

Executives responsible for buying smartphones and the software to manage them say BlackBerry faces long odds.

Tracey Rothenberger, chief operating officer of Ricoh Americas Corp., Malvern, Pa., said that fewer than 500 of the 9,000 smartphones he manages for the printer and copier maker are BlackBerrys. The remainder are made by Apple or powered by Google Inc.’s Android software. “For me, it’s kind of ‘game over’ for them,” he said.

The move comes as Blackberry is succumbing to market pressure about its earnings and ability to continue to make money. The Guardian had this story on Saturday:

With the fall of Nokia looming over him, this weekend will be an uncomfortable one for Thorsten Heins, chief executive of BlackBerry. While the Finnish firm sold its mobile phone business to Microsoft for €5.4bn (£4.5bn) this month, questions are swirling as to how long BlackBerry – which signalled its distress in August by putting itself up for sale – can survive, and in what form.

Things are so bad that on Friday night, market rumours forced Heins to announce the top-line quarterly results a week early. And they are grim: an operating loss of up to $995m (£620m), including $960m of inventory writedowns on its new Z10 handsets released in January, a net loss of more than $250m, revenues half what analysts expected at $1.6bn, and phone shipments of 3.7m – which Apple will comfortably exceed with its new iPhones this weekend alone.

For a company that once dismissed the iPhone for having no keyboard (a key selling point for BlackBerry phones), it’s a humiliation. The low shipment figure exposes Heins’s claim in April that the new Q10 phone – the first keyboard-equipped model using its new BB10 software – would sell “tens of millions”. It might have sold a million.

Now the question is turning to how long BlackBerry has to go. On Friday, the company said it will cut 4,500 jobs, roughly 40% of its 11,000 total worldwide, adding to 7,000 jobs cut in the two previous financial years. It will reduce its future phone portfolio from six to four.

Announcing quarterly results early and layoffs is rough. What’s even worse is all the speculation around potential bidders for the company and no one actually pulling the trigger to make an offer. The latest was a New York Times story saying that Blackberry’s founder was considering an offer, but none came during the weekend:

Mike Lazaridis, the co-founder of BlackBerry who stepped down as co-chief executive in 2012, has reached out to private equity firms about a possible bid for the troubled company.

Mr. Lazaridis has separately approached the Blackstone Group and the Carlyle Group about making an offer, according to people familiar with the matter. These people cautioned, however, that the talks were preliminary and might not lead to any bids.

The potential of any effort to take BlackBerry private was muddied further on Friday, as shares in the company tanked after the company announced quarterly revenue far below analyst expectations. BlackBerry shares listed in the United States plunged 17.1 percent to $8.73.

The Journal had a separate story about the company’s layoffs, which talked about the how hard the last several years have been on employees who don’t know if they’ll have a job or not:

BlackBerry’s spectacular fall has taken a heavy toll on current and former employees of the smartphone maker, which once controlled more than half of the U.S. smartphone market. That has dropped below 3%, according to IDC. BlackBerry employed 12,700 people as recently as March, and the latest cuts—about 4,500 employees—will weigh heavily on this town of about 100,000 people 68 miles west of Toronto.

BlackBerry executives began to realize how badly their new line of phones was selling this summer. Smaller rounds of layoffs had already started, but it became clear that more drastic cuts were needed, people familiar with the matter said.

With a push from board members, the company in August set up a committee to explore the company’s strategic alternatives, including a possible sale. The hope, people familiar with the matter said, was to sell quickly, before BlackBerry’s dismal financial results were announced.

Employees said that during that same period there was confusion about the future of various projects and mixed messages from managers. Some employees said they were still working on new phones but held out little hope about the company’s prospects. At the same time that the company announced the layoffs, it said it would write down nearly $1 billion in unsold phones.

It seems like every week there’s a new story about Blackberry’s next move to save the company. What isn’t apparent is how they’re going to do it. At least it’s keeping the technology reporters supplied with good stories.

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