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.

BlackBerry Posts Huge Loss on Write-Down and Charges

The stock rose as much as 17 percent after the company announced the five-year partnership with Taiwan's Foxconn Technology Co Ltd, which will initially build low-end devices for sale in Indonesia and other emerging markets. BlackBerry said it hoped to expand the fledgling relationship to its top-of-the-line smartphones.

The deal is unconventional in that BlackBerry will no longer pay upfront for components used in the devices made on its behalf in Foxconn's Indonesian and Mexican factories.

Instead, Foxconn will take a share of profit on each device in return for taking on inventory management, which can result in writedowns if smartphones go unsold. Foxconn will also help with developing, designing and distributing the handsets.

Chief Executive John Chen, who took the helm at BlackBerry last month, said he expected the Foxconn deal to help BlackBerry's handset business turn cash-flow positive, and for the company as a whole to post a profit for the fiscal year that begins in early 2015.

"It's almost like BlackBerry is disposing of its consumer handset business without actually disposing of it," said Jefferies analyst Peter Misek, who likened the deal to what Hewlett-Packard Co and Dell have done with laptops.

The move, which comes a month after BlackBerry said it was giving up on a plan to sell itself, helped take the sting out of the massive, $4.4 billion loss that it posted for the quarter ended November 30, as smartphone sales shriveled.

A new line of devices running on BlackBerry 10 software has failed to gain traction, forcing the company to write off $1.6 billion of inventory and supply commitments for the quarter. The previous quarter it wrote off $934 million for unsold phones.

The Waterloo, Ontario-based company pioneered the concept of on-the-go email, and for years its pagers and phones were must-have devices for political and business leaders. But in recent years it has lost its once-dominant market share to Apple Inc's iPhone and a slew of smartphones powered by Google Inc's Android operating system.

As of Thursday's close, the stock had fallen 47 percent this year. It was last trading up 14 percent on Nasdaq at $7.13.

"The most immediate challenge for the company is how to transition the devices operations to a more profitable business model," said Chen, who is credited with turning around Sybase, a database and mobile software company, before it was sold to German software company SAP AG in 2010.

Chen has said he is counting on strong growth in BlackBerry's service business, which manages smartphone traffic on the internal networks of corporate and government clients.

"Just jettisoning all the stuff and driving on with the part of the business that makes money makes a heck of a lot of sense to me and that is very clearly where Chen is going," said Ross Healy, a portfolio manager at Macnicol & Associates who owns a small number of BlackBerry shares.

Carolina Milanesi, an analyst at Kantar Comtech, said the deal is a good move for Foxconn, the world's largest electronic parts manufacturer and a major partner of Apple Inc.

"This might be the first step for them to try and diversify, and experiment with putting their brand on the products they make," she said.

DEVICES ARE A CHALLENGE

In his first presentation to analysts after the release of BlackBerry's results, Chen struck an upbeat tone tempered with a heavy dose of realism. The mix may have helped soothe nervous investors who had sharply lowered their expectations for BlackBerry after a string of disappointing news.

"It's clear that he's not the old guard, he's not there trying to do what Lazaridis and Thorsten were up to. He's actually been taking some concrete steps," said Mark McKechnie, an analyst at Evercore Partners, referring to BlackBerry's founder Mike Lazaridis and Thorsten Heins, Chen's predecessor.

DealBook: 2 Founders of BlackBerry Weighing a Takeover Offer

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BlackBerry Cancels Call to Discuss Its Results

OTTAWA — The management of the ailing smartphone maker BlackBerry canceled a conference call scheduled for Friday to discuss the company’s quarterly financial results.

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While BlackBerry said on Wednesday evening that those results would still be released, it added that the call with analysts and investors was called off because of a conditional and tentative bid for the company announced by its largest shareholder, Fairfax Financial Holdings, on Monday.

The company also said that a written discussion about its financial condition from its management, which is normally released with the quarterly results, would not be available until next week.

On Friday, BlackBerry issued a prerelease announcement indicating that it would post a loss of about $1 billion for the quarter and revenue well below analysts’ expectations. Both are a result of the apparent failure of a new line of BlackBerry 10 phones that were supposed to restore the company’s former fortunes. Consumers, however, appear to be indifferent to them. The company also announced on Friday that it planned to lay off 40 percent of its already diminished work force, or about 4,500 people.

The conference call cancellation adds to the uncertainty and questions surrounding the company, which is based in Waterloo, Ontario.

On Monday, Fairfax, which owns about 10 percent of BlackBerry, said it had signed a letter of intent under which it might pay $9 a share to take BlackBerry private, assuming a variety of conditions were met. If completed, the transaction would value BlackBerry at $4.7 billion.

But Fairfax is not bound to complete the deal nor is it held to the $9-a-share price while it conducts due diligence over the next six weeks. While Fairfax, an insurance, reinsurance and investment company based in Toronto, will not pay any penalty if it walks away, BlackBerry must pay $157 million to Fairfax if it finds a better offer before Fairfax commits.

BlackBerry to Cut 40% of Work Force After Big Loss

But after being upstaged time and again by industry rivals, the devices may soon remain only in memories.

On Friday, BlackBerry announced that it would lay off 4,500 employees, or nearly 40 percent of its already reduced work force. The cut is so deep some analysts and investors said that the company’s days as a smartphone maker were effectively over.

The company also said that it expected to report a quarterly loss of nearly $1 billion next week, mainly the result of a write-off of unsold BlackBerry phones, but also because of payments to stop manufacturers and suppliers from adding to the pile. And of its six phones that the company offers, two will be discontinued.

“This is a recognition that they lost the handset war,” said James H. Gellert, the chairman and chief executive of Rapid Ratings, an investment risk evaluation firm. “It’s certainly a waving of the big, white towel.”

The company halted the trading of its shares to make the bleak announcement. It also said that revenue was expected to have been $1.6 billion in the second quarter, almost half of the $3 billion analysts had anticipated. Sales of phones during that time, it said, totaled 3.7 million. Apple, by comparison, sold 31.2 million iPhones during its last quarter.

More alarming to many analysts was BlackBerry’s announcement that it had used about $500 million in cash to stay operating during the last quarter, lowering its cash holdings to $2.6 billion. Although the company has been losing market share for several years, it had managed to increase its cash holdings.

Shares in the company tumbled 17 percent for the day, to $8.73, nearly all of it after trading was resumed.

Four years ago, BlackBerry had 51 percent of the North American smartphone market, according to the research firm Gartner. But the fast-changing industry, and in particular phones from Apple and Samsung, left the company behind.

“The rest of the smartphone world is racing ahead at top speed while we have BlackBerry stuttering to a stop,” said Michael Gikas, the senior editor for electronics at Consumer Reports.

BlackBerry’s executives initially looked down on the move to making smartphones into pocket-size computers, which was pioneered by Apple’s iPhone. But consumers preferred smartphones with full touch screens, multiple cameras and, most important, hundreds of thousands of apps. BlackBerry’s devices largely stayed the same, often with half-screens and a physical keyboard, and its initial attempts at touch-screen phones were technological failures.

In January, the company introduced the BlackBerry 10 line of phones, which were based around an entirely new operating system of the same name and offered hardware features that were similar to devices from the market leaders.

But the new devices were unable to break the grip of Apple and Samsung. When the latest flagship phone in the line, the Z30, was announced this week, it caused hardly a ripple. Even BlackBerry seemed to have given up. Unlike with other phones in the series, the Z30 release came without any kind of public or flashy demonstration.

The failure of the BlackBerry 10 line of phones quickly led to speculation that the company, like Palm before it, would be broken apart and perhaps gradually disappear, at best lingering as little more than a brand name. This summer, BlackBerry announced that it was undertaking its second strategic review in less than a year. Unlike with the earlier one, however, BlackBerry’s executives did not rule out a sale of the company.

All of the uncertainty surrounding the company, several analysts said, probably made the company’s problems even worse during the last quarter. Corporate and government information technology departments have held back on committing to BlackBerry 10 phones and, more important for BlackBerry, the corporate server software that supports them.

Consumers are often less sensitive to corporate problems. But Keith Lam, a managing partner at Red Sky Capital Management in Toronto, said that carriers appeared to be cutting back their BlackBerry 10 inventory to avoid being saddled with unwanted phones and reducing display space and promotions for the devices in stores.

“From that it kind of snowballs downward for BlackBerry,” said Mr. Lam, whose firm does not manage any BlackBerry shares.

If, as many expect, BlackBerry is no longer in the handset business, the question becomes what remains of value to a potential investor.

Mike Lazaridis, the co-founder of BlackBerry who stepped down as co-chief executive in 2011, has contacted private equity firms about a possible bid for the troubled company. But a private company would be up against some of the largest companies in the world, like Apple.

Even before Friday, many analysts had declared BlackBerry’s hardware business to be worthless. There is no clear consensus, however, on the value of its other assets.

BlackBerry owns a secure global network that once provided it with a selling point for customers seeking security. But that highly centralized network is prone to occasional failures, is based on aging technology and has had its role reduced under BlackBerry 10.

The value of the company’s patents, many of which it holds in partnerships with other technology companies, is also uncertain. The layoffs also suggest that BlackBerry will be forced to give up most of its research and development work, further clouding its value.

“The biggest problem is that they won’t have money for R.&D. and that’s death for a tech company,” said Neeraj Monga an analyst at Veritas Investment Research in Toronto. “It’s not like Coca-Cola, which has been able to bottle the same formula for over 100 years.”

Bits Blog: A New BlackBerry Phone, but Maybe Too Late

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BlackBerry Chief Admits Release of New Phones in U.S. Was Flawed

But Mr. Heins, speaking at the company’s annual meeting, told investors BlackBerry just needed more time for a turnaround — and he again sought their patience.

Not everyone was biting. One shareholder, referring to one of the new phones, the BlackBerry Z10, told Mr. Heins: “My sense is that the rollout of the Z10 was a disaster.”

“Were we perfect at the launch?” Mr. Heins responded. “Probably not. Was it a disaster? I don’t think so.”

After more than two years of development, the new phones and their new operating system were supposed to give BlackBerry smartphones capabilities similar to those of phones made by Apple and Samsung, the dominant forces in the market. But hopes have vanished that the new phones would swiftly increase market share in the United States — now just 0.9 percent, according to a survey from Kantar Worldpanel ComTech.

Late last month, BlackBerry said that it had shipped just 2.7 million of the new models, about a million fewer than analysts expected. That disappointing news set BlackBerry’s stock sharply downward and eliminated the possibility that the annual meeting would be a turnaround celebration.

When Mr. Heins introduced the company’s new phones in New York this year, he spoke to an excited crowd, a situation that was repeated at a meeting this spring with enthusiastic developers. But on Tuesday, when he faced a crowd of shareholders and questions about the weak sales of those phones, the reception was far more muted.

And maybe that is the best he could have hoped for. A few weeks ago, when the shipment numbers were released, the company also reported an $84 million loss in the latest quarter. BlackBerry shares still have not recovered — and a chorus of harsh questions about the direction of the business have not gone away.

Mr. Heins again warned investors to expect more losses during the current quarter, while the company increases its spending on marketing and other promotions for the new BlackBerry 10 line of phones. And although the company has spent the last two years saying the phones were the centerpiece to its future, Mr. Heins repeatedly said on Tuesday that “we are not a devices-only company,” and he outlined his hopes for growth in its data services business.

He attributed the disappointing reception for BlackBerry 10 to the United States market.

“It is really a challenge in the U.S.,” Mr. Heins said at the meeting, which was webcast from the University of Waterloo in Ontario. When another shareholder asked him why the company had been unable to win over American investors, particularly ones based in New York, he said: “I would absolutely admit that this is an uphill battle.”

Richard Piasentin, the managing director of sales and marketing for the United States, left BlackBerry last month, Adam Emery, a spokesman for the company, said on Tuesday.

Some of problems with the BlackBerry 10 release seemed more related to the products than to advertising or lack of prominence in carriers’ stores, which had been cited as problems.

Some buyers of the Q10, a model that includes BlackBerry’s signature keyboard, have said they were disappointed to discover that it initially could not synchronize calendar and contact information with corporate systems that use Microsoft Outlook. Others discovered mail syncing issues that they had not had with previous BlackBerrys. And although BlackBerry continues to expand the apps offered for the phone, many important ones are missing, and assessments of their overall quality are mixed.

Among the disappointed was Mark R. McQueen, the president and chief executive of Wellington Financial in Toronto. While Mr. McQueen is a BlackBerry loyalist, his frustration with the Q10 became so great that he wrote two detailed posts enumerating its problems on his blog, which is widely followed in Canada’s financial community. He wrote that the phone’s shortcomings had prompted him to sell his BlackBerry shares at a loss.

“The sad reality is that BlackBerry management has failed to deliver on the incredibly modest expectations of someone who has held shares in the company, on and off, since the late 1990s,” Mr. McQueen wrote.

Many technology reviewers praised several features of the new phones. Mike Gikas, the senior editor for electronics at Consumer Reports, said the new phones were “pretty good but they don’t have the pizazz of top-shelf performers. No one’s dying for these phones.”

He said that whenever he was asked for his thoughts about the new BlackBerrys, “the next question is: ‘Do you think they’re going to be around?’ And that’s a consideration for people on a two-year contract.”

BlackBerry Reports Quarterly Loss

BlackBerry, which has struggled to claw back market share from the likes of Apple Inc's iPhone, Samsung Electronics Co Ltd's Galaxy phones and other devices powered by Google Inc's Android operating system, reported a loss in the fiscal first quarter ended June 1, and sales of its make-or-break new line of devices were softer than expected.

The company also said it will not make an operating profit in the current quarter.

Shares of BlackBerry, which changed its name from Research in Motion, closed 27.8 percent lower at $10.46 on the Nasdaq on Friday. The stock touched levels last seen in November 2012, before the early 2013 launch of the new range of smartphones.

Some analysts believe that potential buyers may take a look at BlackBerry, given assets that include a wealth of valuable patents, as well as hardware and service businesses.

"If you look at the asset base that they have at their disposal, it's formidable," said John Jackson, research vice president for IDC, in response to a question on Reuters Television. "So there are any number of companies that might have an interest in RIM's assets if indeed it's in play."

Macquarie analyst Kevin Smithen cut his rating on BlackBerry to "underperform" from "neutral" and said he sees a breakup or sale of the company as a likely end game.

BlackBerry invented the concept of on-the-go email more than a decade ago with clunky little devices with a mini keyboard. The gadgets, which offered powerful security features, allowed the company to corner the lucrative market serving business and legal professionals as well as government workers.

But many in that market are now moving to other devices, leaving BlackBerry struggling to make its mark both at the top and the bottom of a competitive smartphone market.

STAYING THE COURSE

BlackBerry said it shipped 6.8 million smartphones in the quarter, including about 2.7 million BB10 devices. This fell shy of market expectations of more than 3 million shipments for its new Z10 and Q10 smartphones. The first-quarter results and revenue figures also missed analyst estimates.

By comparison, Apple shipped 37.4 million iPhones in the March quarter, up from 35.1 million a year ago.

Chief Executive Thorsten Heins said it would take "at least a few quarters" to turn BlackBerry around and he insisted the company would stay the course.

"We're not sitting here devastated or destroyed," Heins told Reuters in an interview after the results came out. "In my view, given where we are with the portfolio and the roll-out, it actually was a good quarter."

On the bright side, BlackBerry's cash position rose to $3.1 billion as of June 1, up about $200 million from the final quarter of the last fiscal year. The company has no debt.

Excluding one-time items, Waterloo, Ontario-based BlackBerry reported a loss from continuing operations of $67 million, or 13 cents a share, on revenue of $3.1 billion. The company said Venezuelan foreign exchange regulations had knocked some 10 cents a share off the bottom line.

Analysts, on average, had expected a profit of 6 cents a share, on revenue of $3.36 billion, according to Thomson Reuters I/B/E/S.

The net loss was $84 million, or 16 cents a share in the quarter, down from $518 million, or 99 cents a share a year ago.

But BlackBerry also reported a steep decline in revenue from its high-margin service business, the fees BlackBerry collects for providing data and security services to customers. Those fees had been expected to fall. But the Venezuelan curbs meant that the decline was steeper than forecast, BlackBerry said.

MURKY OUTLOOK

BlackBerry launched two new BB10 smartphones this year, the touch screen Z10 device and then the Q10, which includes the mini keyboard many BlackBerry users still covet, as well as a less expensive Q5 keyboard device targeted at emerging markets.

But the Z10 only hit store shelves in the crucial U.S. market in late March, while the Q10 device reached the United States only after the quarter had ended.

BlackBerry said it plans to unveil one more lower-priced phone running on its old BlackBerry 7 platform later this year, as it tries to keep market share in price-sensitive emerging markets that are flooded with cheap Android devices.

BlackBerry did not provide a detailed outlook for the rest of the year, saying the smartphone market remained highly competitive, making it difficult to estimate units, revenue and levels of profitability.

Wells Fargo analyst Maynard Um, who cut his rating on the stock to "market perform" from "outperform," said the latest results show that the transformation will take some time.

"Our downgrade does not necessarily reflect a view that BlackBerry will not be able to succeed, but rather, that success may be further out than we would like and that the benefits may be costly upfront as the company invests heavily."

(Editing by Janet Guttsman, Frank McGurty and Matthew Lewis)

Bits Blog: BlackBerry Posts Loss, Despite New Phone

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Bits Blog: Verizon Wireless Chief Sees Hope for New BlackBerry Phones

Jessica Rinaldi/Reuters Dan Mead, president and chief executive of Verizon Wireless.

BlackBerry’s phones have been off to a weak start in Canada, the home turf of the struggling handset maker. But the new BlackBerrys are getting a warm welcome from Verizon Wireless, the biggest American carrier.

Dan Mead, chief executive of Verizon Wireless, cheered on the new BlackBerry phones at an investor conference on Wednesday morning. He said Verizon Wireless customers are especially interested in the new BlackBerry phone that includes a physical keyboard, called the Q10 (the Q stands for “qwerty”), which has yet to be released on the Verizon network.

BlackBerry’s new touch-screen smartphone, the Z10, has already turned in strong sales for Verizon, according to a recent analysis.

“We think that there is an important place for BlackBerry,” Mr. Mead said at the Jefferies 2013 Global Technology Media and Telecom Conference. “We have a lot of BlackBerry customers on our network. There seems to be a hunger for the qwerty keyboard.”

Mr. Mead said BlackBerry added diversity to the handset market, which was good for the industry and for Verizon. Last quarter, 4 million of the 7.2 million smartphones sold by Verizon were iPhones.

Bits Blog: BlackBerry to End Music Service

BlackBerry will shut down a subscription service that married its BlackBerry Messenger instant messaging with online music downloads. Crystal Roberts, a spokeswoman for the company, said the decision to end BBM Music on June 2 followed a “strategic business review” by the company.

Like Apple’s attempt to turn iTunes into a social medium with Ping, BBM Music, started in 2011, was widely seen as something of a failure. Ms. Roberts declined to say how many people subscribed.

The service’s acceptance may have been limited by its complexity. Users do not purchase songs from it, as with Apple’s iTunes or with Amazon. Nor do their monthly subscription fees give them unlimited access to a large online catalog of music like that offered by Spotify.

Under BlackBerry’s system, users in the United States pay $5 a month but can pick only 50 songs. They can change only half of those songs each subsequent month.

Subscribers can download music from the 50-song playlists of other BBM Music users they know. But BlackBerry’s significant decline in the United States market reduced the utility of that feature.

Ms. Roberts said that BBM Music subscribers would be offered no-cost 30-day trial subscriptions to Rdio, an online subscription service similar to Spotify.

BlackBerry Logs Quarterly Profit, 2013 Loss

The financial report provided a mix of positive and worrying news, leaving some analysts without a clear picture of the once powerful, but now struggling, company’s long-term future.

“It is encouraging that they’ve stabilized the company and they’re not bleeding to death,” said Edward Snyder, an analyst with Charter Equity Research. “But they still have a long ways to go.”

The annual loss, which was reduced from an operating loss of $1.2 billion because of tax benefits, compared with net earnings of $1.16 billion a year earlier.

In the latest quarter, the fourth of the 2013 fiscal year, which ended March 2, the company lost $18 million from operations. But the recovery of income taxes transformed that into a profit of $98 million, or 19 cents a share.

BlackBerry has struggled with declining sales, and that trend continued. Revenue in the latest quarter was $2.67 billion, compared with $2.72 billion in the same period a year ago. Annual revenue fell to $11 billion, from $18.4 billion a year earlier.

For about one month of the quarter, the first of the company’s new phones, the BlackBerry Z10, was on sale in Canada, Britain and some other markets, but not the United States. BlackBerry said that it shipped about a million of the handsets during that time, which was in line with several analysts’ estimates.

“It has not been easy, but the BlackBerry team is delivering,” Thorsten Heins, the chief executive, told analysts in a conference call.

In contrast with many new handsets from other companies, however, the BlackBerry Z10 has been far from a sellout.

Mr. Heins said that since its introduction, only about two-thirds to three-quarters of the touch-screen-based Z10s that were shipped were ultimately sold at retail.

Shaw Wu, an analyst with Sterne Agee, said the sales data suggested that “The BlackBerry Z10 is not firing on all cylinders.”

He said the slower sales may have been a result of current BlackBerry owners awaiting the release in April of the Q10, another high-end phone with a touch screen and a physical keyboard — the keyboard long being a hallmark of the brand.

Mr. Heins said that another new phone using the BlackBerry 10 operating system, with a lower price than the Z10 and Q10, would be released this year. For AT&T subscribers in the United States, the Z10 costs $200 with a two-year contract or $550 without a contract.

BlackBerry reported having 76 million subscribers worldwide at the end of the period, a loss of about three million. Until the third quarter of the fiscal year, BlackBerry had consistently gained subscribers.

In an unanticipated move, the company also announced that Mike Lazaridis, one of its co-founders, would retire and cut all formal ties to BlackBerry in May.

In an interview, Mr. Lazaridis said that the company’s directors initially opposed his proposal in January 2012 that he and Jim Balsillie step down as co-chairmen and co-chief executives in favor of Mr. Heins as the top executive. The two men were widely criticized at the time for not responding more rapidly to competition from Apple’s iPhone and phones using Google’s Android operating system.

Mr. Lazaridis said he agreed to remain vice chairman until the introduction of BlackBerry 10. Mr. Lazaridis said that in the last year, he guided BlackBerry on the product introduction, and helped Mr. Heins with longer-term plans.

“Having fulfilled the commitment I made, it’s time to move onto my next adventure,” Mr. Lazaridis said. Last week, he announced plans to start an investment fund focused on companies working on computers based on principles from quantum physics.

Mr. Heins said that he expected BlackBerry, formerly Research in Motion, to break even in the current quarter despite doubling its spending on marketing to promote the Z10.

AT&T became the first American carrier to offer the new phone last week. But visits to several wireless stores on Wednesday found striking differences in sales support for the product that BlackBerry, which is based in Waterloo, Ontario, hopes will revive its diminished fortunes.

At several locations, including an AT&T store on Fifth Avenue in New York and another near Union Square in San Francisco, the Z10 was lumped in with other phones, some two years old, while signs and promotional material were absent. But at an AT&T store in New York’s busy Union Square, the Z10 was heavily promoted. A salesman who identified himself as a BlackBerry specialist gave a thorough demonstration of the device, including its ability to switch between corporate and personal apps.

The unevenness of presentation was also apparent at T-Mobile USA stores, which this week began selling the Z10, as well as the Apple iPhone 5 and Samsung Galaxy S 4, for $100 down and 24 monthly payments of $20. Verizon Wireless, which has a long association with BlackBerry, began selling the Z10 on Thursday and prominently featured the device on its home page.

Brian X. Chen contributed reporting from New York and Quentin Hardy from San Francisco.

Samsung Armors Android to Take On BlackBerry

Samsung’s smartphones have been best sellers all over the world, but the company has been, until recently, marketing them to consumers, not businesses.

But over the last year, Samsung, the South Korean manufacturer, has been quietly beefing up the Google Android software that runs on its smartphones to give businesses a phone with more security.

It introduced that software, named Knox, as in the fort, at an international cellphone industry trade show here this week. Samsung said its new version of Android protected users from malware.

The company hopes that the new software makes Samsung smartphones attractive to corporate information technology departments that worry about the theft of sensitive corporate data by hackers. I.T. managers have been among BlackBerry’s most loyal customers because of the security BlackBerry built into its phones and the private communications network it maintains.

Samsung said it teamed up with General Dynamics, a military contractor, to ensure its phones met the strict security standards of government agencies. Samsung executives have said Knox will first appear on a new Galaxy smartphone in the second quarter. That phone is likely to be the Galaxy S IV, which is expected to be introduced at an event in New York on March 14.

The company has also been focusing more on businesses in its advertisements. It ran a series of amusing commercials during the Academy Awards show on Sunday featuring the phones’ handiness in a business.Samsung said it had evidence that it was ready for enterprise. Thousands of its Galaxy smartphones and tablets are already in the hands of American Airlines flight attendants, Dish Network cable technicians and Boston Scientific health care professionals.

“We will become No. 1 in enterprise,” said Tim Wagner, a vice president for enterprise sales at Samsung who worked at BlackBerry. “If Samsung chooses to be No. 1 in a certain area, we will become No. 1.”

Samsung has become the top seller of televisions and cellphones, but persuading I.T. managers to risk their jobs on a new security system will be tricky. BlackBerry executives insist the BlackBerry is still the top phone for professionals. But the company is vulnerable. Android phones and Apple iPhones last year replaced BlackBerrys as the most-used phones among workers all over the world, according to a study by the research firm IDC.

It found that more businesses were buying iPhones for their employees, and Android phones were the most popular among workers buying their own phones. That puts Samsung, as the leading Android phone maker, in position to become a top vendor for businesses.

To appeal to the business user, Samsung added special features to Android. One tool allows the phone owner to create separate “personas” for personal and business use, a feature also on the new BlackBerry 10.

In a phone’s business persona, an office worker can use apps approved and monitored by the I.T. department. The worker can switch to a personal persona, where personal photos, games and calendar are stored, which cannot be seen by I.T. If the employee were to leave the company and keep the phone, the I.T manager can erase the data from the business persona, leaving the personal data untouched.

The business persona also has a layer of security. If malware were to infect the phone, it would not be able to invade the apps and data in the business persona, said Rhee Injong, a senior vice president for the Samsung group that developed Knox.

Samsung also has teamed up with AirWatch, a company that makes tools for I.T. professionals to manage phones. AirWatch will make detailed tweaks inside the business persona of a Samsung device, like creating restrictions for Wi-Fi networks or blacklisting certain apps.

John Marshall, chief executive of AirWatch, said that the benefit of Samsung’s openness was that businesses could tailor their phone’s software and also better manage the corporate fleet of phones. He said that because BlackBerry made its own I.T. management software, its flexibility was limited. BlackBerry, however, said that its approach offered higher and more consistent levels of security.

Brian X. Chen reported from Barcelona and Ian Austen from Ottawa.

A Million Users Desert BlackBerry, and Revenue Falls 48%

It reported other bad news as well, a month before introducing its new BlackBerry 10 phones to the public. Revenue fell 48 percent in the company’s fiscal third quarter, ended Dec. 1, to $2.7 billion from $5.2 billion a year earlier.

After a favorable tax gain, RIM reported net income of $9 million, or 2 cents a share. A year ago during the same period, RIM earned $265 million, or 51 cents a share. The company said that using nonstandard accounting methods to adjust for the tax gain and other pretax charges led to an adjusted net loss of $114 million for the third quarter, or 22 cents per share.

Analysts had expected a larger loss of 35 cents a share, according to a survey by Thomson Reuters. Nevertheless, RIM’s shares fell about 9 percent in after-hours trading. Before RIM’s announcement, shares closed at $14.12, up for the day by 3.6 percent.

The company has pinned all its hopes on the BlackBerry 10 to win back customers who may have defected to iPhones or phones using Google’s Android operating system. RIM said 79 million customers were using BlackBerry devices.

“We believe the company has stabilized and will turn the corner in the next year,” Thorsten Heins, the chief executive, said in a conference call with analysts. “We are realistic about our competitors, but we know that customers in this industry demand and respond to innovation.”

Until now, RIM had been able to offset the sharp drop in the BlackBerry’s popularity in its traditional markets, particularly the United States, through increased sales to users in developing countries. Because every BlackBerry user generates high-margin monthly fees from carriers for RIM, the last quarter’s loss of subscribers is more than just a symbolic setback.

In the conference call Mr. Heins indicated that RIM had been reducing those fees, which account for 36 percent of RIM’s revenue, in a bid to keep BlackBerry’s current product offerings alive. And in an announcement that seemed to concern some analysts on the call, Mr. Heins said that the new BlackBerry 10 phones would substantially revamp how RIM set service fees.

With BlackBerry 10, Mr. Heins said, corporate and government users will be able to pick and choose what services they purchase from RIM, a step that he said could mean that some of them would no longer generate any user fees. The company was unclear about what fees BlackBerry 10s sold to consumers would produce. Last month Mr. Heins said that consumer BlackBerry 10 models would no longer benefit from RIM’s special Web compression technology, the chief service provided to consumers by RIM.

RIM, which has no debt, pleasantly surprised analysts by increasing its cash on hand by $600 million, to $2.9 billion. The company was vague about how it achieved that beyond saying that the newfound cash came from “working capital conversion.” In the past, several analysts have speculated that the company has mainly become better at collecting its outstanding bills.

Mr. Heins said that the introduction of BlackBerry 10, however, would bring an end to the company’s cash hoarding. RIM, he said, will dig into its cash reserves during the quarter to stockpile BlackBerry 10 phones in advance of their release and to finance advertising and other marketing campaigns for the devices.

Nevertheless, Mr. Heins predicted that RIM would still hold more cash at the end of its fiscal year than the $2.1 billion it had on hand at its beginning.

RIM shipped 6.9 million current-model BlackBerry phones during the quarter and 255,000 of its BlackBerry PlayBook tablets. During the call, company officials indicated that those products were being heavily discounted.

Bits Blog: BlackBerry Phones Get Free Calls Over Wi-Fi

By using Research In Motion’s exclusive data network, the BlackBerry Messenger service, or BBM, has long allowed its users to avoid texting charges from their wireless carriers. On Monday, RIM added dodging voice charges to BBM’s list of features.

RIM introduced an upgrade for BlackBerry phones that will allow their owners to make free calls to anywhere in the world through Wi-Fi connections. As with all things BBM, the catch is that the person on the other end of the call must also be a BlackBerry user, a group which is declining in the United States.

RIM has long maintained close ties to wireless carriers. Jan Dawson, a telecommunications analyst with Ovum, said that free calling through BBM Voice was unlikely to undermine that relationship. He said that locations with Wi-Fi usually have conventional landline phones already providing an alternative to wireless voice calls. When that’s combined with a trend toward flat-rate wireless billing plans from carriers and the fact that the new service only works between BlackBerrys, “that will relegate it to a very small minority of overall calling scenarios and therefore carrier impact will be minimal,” Mr. Dawson wrote in an e-mail.

He added: “On the other hand, if Apple ever does something like this on the iPhone, that might have a much bigger impact.”

In a statement, John Walls, a spokesman for CTIA, the wireless industry trade group, suggested that the new feature might be a gain for the industry.

“Wireless carriers are operating tens of thousands of Wi-Fi hotspots around the United States, and consumers are the beneficiaries of such innovative solutions that are the result of a competitive, responsive industry,” he wrote.

The upgrade, which is being offered at no charge, is for current BlackBerry models. While the company’s announcement did not indicate what it has planned for the BlackBerry 10 phones, which will be unveiled at the end of January, it has said that the version of BBM for those phones will include several new features.

Quick, Hide the BlackBerry, It’s Too Uncool

“I’m ashamed of it,” said Ms. Crosby, a Los Angeles sales representative who said she had stopped pulling out her BlackBerry at cocktail parties and conferences. In meetings, she says she hides her BlackBerry beneath her iPad for fear clients will see it and judge her.

The BlackBerry was once proudly carried by the high-powered and the elite, but those who still hold one today say the device has become a magnet for mockery and derision from those with iPhones and the latest Android phones. Research in Motion may still be successful selling BlackBerrys in countries like India and Indonesia, but in the United States the company is clinging to less than 5 percent of the smartphone market — down from a dominating 50 percent just three years ago. The company’s future all depends on a much-delayed new phone coming next year; meanwhile RIM recorded a net loss of $753 million in the first half of the year compared with a profit of more than $1 billion a year earlier.

Among the latest signs of the loss of cachet: One of the first steps Marissa Mayer took as Yahoo’s newly appointed chief executive to remake the company’s stodgy image was to trade in employees’ BlackBerrys for iPhones and Androids. BlackBerrys may still linger in Washington, Wall Street and the legal profession, but in Silicon Valley they are as rare as a necktie.

As the list shrinks of friends who once regularly communicated using BlackBerry’s private messaging service, called BBM, many a BlackBerry owner will not mince words about how they feel about their phone.

“I want to take a bat to it,” Ms. Crosby said, after waiting for her phone’s browser to load for the third minute, only to watch the battery die. “You can’t do anything with it. You’re supposed to, but it’s all a big lie.”

The cultural divide between BlackBerry loyalists and everyone else has only grown more extreme over the last year as companies that previously issued employees BlackBerrys — and only BlackBerrys — have started surrendering to employee demands for iPhones and Android-powered smartphones.

Goldman Sachs recently gave its employees the option to use an iPhone. Covington & Burling, a major law firm, did the same at the urging of associates. Even the White House, which used the BlackBerry for security reasons, recently started supporting the iPhone. (Some staff members suspect that decision was influenced by President Obama, who now prefers his iPad for national security briefings. A spokesman for the White House declined to comment.)

Out in the world, the insults continue. Victoria Gossage, a 28-year-old hedge fund marketer, said she recently attended a work retreat at Piping Rock Club, an upscale country club in Locust Valley, N.Y., and asked the concierge for a phone charger. “First he said, ‘Sure.’ Then he saw my phone and — in this disgusted tone — said, ‘Oh no, no, not for that.’ ”

“You get used to that kind of rejection,” she said.

“BlackBerry users are like Myspace users,” sneers Craig Robert Smith, a Los Angeles musician. “They probably still chat on AOL Instant Messenger.” 

BlackBerry outcasts say that, increasingly, they suffer from shame and public humiliation as they watch their counterparts mingle on social networking apps that are not available to them, take higher-resolution photos, and effortlessly navigate streets — and the Internet — with better GPS and faster browsing. More indignity comes in having to outsource tasks like getting directions, booking travel, making restaurant reservations and looking up sports scores to their exasperated iPhone and Android-carting partners, friends and colleagues.

“I feel absolutely helpless,” said Ms. Gossage. “You’re constantly watching people do all these things on their phones and all I have going for me is my family’s group BBM chats.”

Ryan Hutto, a director at a San Francisco health information company, said he frequently depended on others, often his wife, for music playlists, navigation and sports scores. “After two or three questions, people start to get irritated,” Mr. Hutto said.

His wife, Shannon Hutto, says with a sigh: “Anytime we go anywhere, I always have to pull up the map. If we’re searching for a restaurant, I pull up the Yelp app. If we need a reservation, I pull up OpenTable. I kind of feel like his personal assistant.”

Still, a few BlackBerry users say they’re sticking with the device, mainly because of the BlackBerry’s efficient, physical keyboard. “I use my BlackBerry by choice,” said Lance Fenton, a 32-year-old investor who frequently travels and needs to send e-mails from the road. “I can’t type e-mails on touch-screen phones.”

Mr. Fenton said he could not wrap his head around iPhone fever. “I constantly ask people, ‘What is so great about it?’ and they have these nonsensical answers,” he said. “Someone told me I’m missing out on some app that maps their ski runs. I ski four days a year. On the road, I don’t need a ski app.”

RIM’s most recent efforts to hold on to loyal customers, as well as software developers building apps for its next generation of phones scheduled to be available next year, have elicited universal cringes. In a recent promotional video, Alec Saunders, RIM’s vice president for developer relations, is shown belting out a rock song titled “Devs, BlackBerry Is Going to Keep on Loving You,” a riff on the 1981 power ballad by REO Speedwagon “Keep on Loving You.”

“This is the sign of a desperate company,” said Nick Mindel, a 26-year-old investment analyst. “Come on, BlackBerry, I always had some faith, but you just lost a customer. Frankly, I don’t think they can afford to lose many more.”

After eight years with a BlackBerry, Mr. Mindel said he just joined the wait list for the iPhone 5. When it arrives, he said, "I’m considering removing my BlackBerry battery, pouring in cement, and using the BlackBerry as an actual paperweight.”

BlackBerry Maker Posts a Loss, but Stock Jumps in After-Hours Trading

Without naming the rivals to the BlackBerry 10 phone, Thorsten Heins, the company’s president and chief executive, acknowledged that Apple’s iPhone 5, new smartphones running Google’s Android operating system and Windows Phones will make life even more of a struggle for RIM before its rollout.

“There’s many new products coming in so the market is going to get tougher, more challenging,” Mr. Heins told analysts in a conference call Thursday, adding that that will most likely force RIM to cut prices further.

After twice delaying the BlackBerry 10, the company has promised to deliver the smartphone sometime next year.

Many analysts had expected nothing but bad financial news for the quarter long before Thursday. “The street is largely giving RIM a pass on this quarter as it readies the important BlackBerry 10 launch,” said Bill Kreher, an analyst at Edward Jones. “The fact of the matter is that the company has really placed all its bets on BlackBerry 10.”

There was no concealing how far RIM’s fortunes had declined. Its net loss for the second fiscal quarter, which ended Sept. 1, was $235 million — better than the $518 million loss in the previous quarter, but a steep fall from the net income of $329 million in the same quarter a year earlier. Shipments of BlackBerrys last quarter were 7.4 million, compared with 10.6 million a year earlier.

The company said revenue in the most recent quarter was $2.9 billion, up from $2.8 billion in the first quarter though down 31 percent from $4.2 billion a year ago. Analysts had expected a far steeper year-on-year drop in revenue of 41 percent and some feared that the company had dipped into its cash holdings. But RIM actually increased its cash thanks to sharp cost-cutting.

As a result, RIM’s stock jumped more than 20 percent in after-hours trading. In the regular session, before its announcement, it closed at $7.14 a share. RIM’s shares have been as high as $24.74 over the last year.

Several analysts said they were now focused on next year. The new smartphones will be based on a new and more sophisticated operating system and are promised for the first calendar quarter of next year.

“I don’t think anything good can come out until they release BB 10, aside from selling the company or something else in the strategic review,” said Peter Misek, an analyst with Jefferies & Company.

But Shaw Wu, an analyst at Sterne Agee, said the dominance of Apple and Android had closed the window of opportunity for RIM’s BlackBerry 10 strategy and turned the company’s last great hope into its biggest problem.

“It’s about survival now, it’s not about BlackBerry 10,” said Mr. Wu, who is based in San Francisco. “That’s almost secondary. The battle now is staying alive and looking after your current customers. It’s not really clear that their core customers are looking for BlackBerry 10.”

Unless BlackBerry 10 is an exceptional hit, which is far from certain, Mr. Wu said that RIM might be able to continue for only one or two more years. Some analysts had expected that the company would report that subscriber growth had stalled. At a developers’ conference earlier this week, Mr. Heins  said that the number of BlackBerry users had instead grown to 80 million, up from 78 million.

Unlike other smartphone makers, RIM continues to directly profit from every active BlackBerry handset long after its sale. RIM receives monthly subscription fees from carriers for every BlackBerry in exchange for routing the phone’s data through its own, closed network. Under normal conditions, the network allows RIM to provide high security for corporate and government users and it reduces the amount of wireless data consumed by all BlackBerrys.

But it became apparent in the conference call that growth was driven by sales in markets like South Africa and Indonesia where prices and service revenue are low.

“They’re pushing the subscriber base up by offsetting the loss of very high-value customers in markets where it’s critical to build momentum now,” said Charles S. Golvin, an analyst at Forrester Research. “It’s a matter of the market getting away from them.”