Blackberry loses nearly $1 billion in quarterAP FILE PHOTO
BlackBerry’s employees prepare the launch event for the company’s new smartphones in London earlier this year. The company said Friday that it lost $965 million during its fiscal second quarter.
OTTAWA, Ontario — Facing an uncertain future and a highly conditional takeover bid, BlackBerry said Friday that it lost $965 million on sales of $1.6 billion during its fiscal second quarter.
The loss mainly reflected a $934 million write-down of a growing inventory of unwanted BlackBerry Z10 phones, the devices that the company had hoped would restore its fortunes, as well as $72 million in charges related largely to layoffs.
The $1.6 billion in revenue during the three-month period that ended Aug. 31 was well below the $3 billion analysts had anticipated and reflected a 49 percent drop from the first quarter, illustrating the rapidity of the company’s decline.
While BlackBerry said 5.9 million BlackBerry phones were sold to customers during the quarter, a large percentage of them came from inventory that had been shipped to wholesalers and carriers earlier. During the last quarter, BlackBerry shipped just 3.7 million phones. Most of them, the company said, were from an older model line that it now plans to phase out.
While many questions have arisen over BlackBerry’s future, the company canceled an earnings conference call with analysts scheduled for Friday. It also said earlier this week that management’s explanation of the results, which is normally included with its quarterly financial statements, would not appear until next week.
In a brief statement included with the financial report, Thorsten Heins, the company’s chief executive, said the company remains strong despite a widespread perception to the contrary.
“We understand how some of the activities we are going through create uncertainty, but we remain a financially strong company with $2.6 billion in cash and no debt,” Heins said. “We are focused on our targeted markets, and are committed to completing our transition quickly in order to establish a more focused and efficient company.”
Heins boasted about the company’s cash position, but Friday’s results showed that it declined by $500 million during the last quarter.
The dismal results capped a week of turmoil for the once-preeminent smartphone maker. Last week, BlackBerry warned investors about the worst of the bad news that was to come, including the inventory write-down related to the BlackBerry 10 phones.
The write-down was seen by many analysts and investors as the final confirmation that the company’s turnaround plan had failed, prompting an immediate drop in BlackBerry’s shares last Friday.
Over the weekend, BlackBerry’s directors accepted a conditional, nonbinding bid from Fairfax Financial Holdings, the company’s largest shareholder, to take the company private. That letter of intent, announced Monday, proposes to pay $9 a share for BlackBerry, valuing the company at $4.7 billion.
But there remained widespread uncertainty that Fairfax would complete a deal on Nov. 4, the date it has set to finish its due diligence. Fairfax, an insurance and investment company in Toronto, appears to be bringing nothing to the transaction beyond the 10 percent of BlackBerry it now holds. And the company has been economical with information about how the transaction would be financed, particularly the names of other investors it hopes will bring some $1 billion to the deal.
As a result, BlackBerry’s shares have been trading under the $9 price proposed by Fairfax.
Fairfax has not responded to requests for comment. But in an interview with The Globe and Mail, a Toronto newspaper, Prem Watsa, the chairman and chief executive of Fairfax, said that he has so many potential partners that the bidding group will be oversubscribed. Although again declining to name any potential members of the group, Watsa said the deal will be completed.
“Our offer is a definite offer,” Watsa told the newspaper. “We wouldn’t put our name to a deal with the board of directors of BlackBerry if it wasn’t a good offer.”
To avoid allegations of a conflict of interest, Watsa stepped down from BlackBerry’s board in August when the company announced a strategic review that could include a sale.
If Fairfax walks away on Nov. 4, it will not incur any penalty. But if BlackBerry accepts another bid before then, it will have to pay Watsa’s company $157 million. Several analysts, however, are skeptical that any other group is interested in buying BlackBerry for more than $9 a share.
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