BlackBerry Quits on Consumer and 4,500 Workers
NEW YORK ( TheStreet) -- BlackBerry
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
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.
"Going forward, we plan to refocus our offering on our end-to-end solution of hardware, software and services for enterprises and the productive, professional end user," Heins said in a statement.
"This puts us squarely on target with the customers that helped build BlackBerry into the leading brand today for enterprise security, manageability and reliability."
BlackBerry will trim its smartphone portfolio from six devices to four, including two high-end devices and two entry-level devices with touch keyboards that are targeted at enterprise and so-called "prosumer-centric" users. The company also said it will launch the BlackBerry Z30, its next high-end smartphone, this week. BlackBerry Z10 smartphones are now expected to be targeted at entry-level smartphone users.
Heins may be making a painful but necessary choice of dedicating BlackBerry to a dwindling enterprise market, as businesses allow workers to bring their own Apple, Microsoft or Google devices into their corporate infrastructure.