Saturday, December 21, 2013

BlackBerry Posts Huge Loss

Nathan Denette/CP, via Associated PressBlackBerry introduced the Z10 model earlier this year in Toronto. The company said it was stepping back from its handset business.

OTTAWA — BlackBerry reported a $4.4 billion loss and a 56 percent drop in revenue for its fiscal third quarter on Friday and said it would step back from its once-core handset business through a partnership with the Asian contract manufacturer Foxconn.

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The dismal financial news followed the failure of BlackBerry to find a buyer for the company last month and the replacement of Thorsten Heins, the chief executive, with John S. Chen, the former chairman of Sybase. Mr. Chen has since fired several high-level executives at the company.

The substantial loss, which follows one of nearly $1 billion in the second quarter, again reflected the failure of the BlackBerry 10 line of phones, which were portrayed as a lifesaver for the company when introduced earlier this year. The third-quarter loss included a $2.7 billion write-down mainly related to BlackBerry 10 phones. Of the 4.3 million BlackBerrys purchased by consumers and businesses during the quarter, 3.2 million were models that use the obsolete BlackBerry 7 operating system.

The company’s $1.2 billion in revenue compared with $2.7 billion in the same period a year ago and represented a 24 percent drop from the previous quarter.

BlackBerry, like other many other hardware companies including Apple, has long relied on Foxconn to manufacture phones. But the new partnership appears to take the relationship to a new level.

The arrangement seems to be a way for BlackBerry to effectively hand over some of its handset business without running afoul of Canadian foreign investment laws. The government of Canada has made it clear that for national security reasons it would not allow the sale of BlackBerry or any significant portion of the company to any Chinese firm or a company with extensive Chinese operations, as is the case with Foxconn which which headquartered in Taiwan.

BlackBerry said that it would jointly develop and manufacture some phones with Foxconn in the future, including a new model aimed at the Indonesian market, and that Foxconn “will manage the inventory of those devices.” BlackBerry said that it will control all of the “intellectual property” in phones created through the partnership.

As he has suggested previously, Mr. Chen said that as the company slowly steps out of the handset business, it will focus its energies on its BlackBerry Messenger instant messaging service; software that allows companies to manage and control smartphones used by their employees; and developing mobile data products for automobile manufacturers and mobile security.

“With the operational and organizational changes we have announced, BlackBerry has established a clear road map that will allow it to target a return to improved financial performance in the coming year,” Mr. Chen, who is also executive chairman, said in a statement.

This article has been revised to reflect the following correction:

Correction: December 20, 2013

An earlier version of this article misstated the description of Foxconn, the contract manufacturer. It is headquartered in Taiwan, not China.

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