Sunday, June 30, 2013

(Business) Blackberry: On The Verge of Demise?

The chips are clearly down for Blackberry as the company reported a loss and saw a massive sell off against its stock and a plunge in its share price which means not only are the chips down for the company but they are cold and wet. 

But for all the news signalling the poor state of Blackberry, its losses are so bad when considered with some context. while a loss of $84m is nothing to jump up and down in celebration about at any company, it definitely should be at Blackberry as considering the massive $518m loss they made in 2012 in the same quarter.

A substantial share of the 2012 loss was incurred through the company exercising its CORE (Cost Optimization and Resource Efficiency) program which meant a serious restructure of the company involving "the streamlining of the BlackBerry smartphone product portfolio, the optimization of the Company’s global manufacturing footprint, the outsourcing of global repair services, the alignment of the Company’s sales and marketing teams and a reduction in the number of layers of management". The program has cost the company an awful lot of money with the scheme costing $220 million in paying off "employee termination benefits, facilities costs and manufacturing network simplification costs".

Despite the cost, the program is working telling from the massive drop in the losses it has made in the last few quarters however it is clear that work still has to be done as the company has projected that it may make a loss in the next quarter in September. However, while the company may make a loss in September  should it follow the current trend of Blackberry approaching profitability, the company should see it cost of sales go down which is good news considering it eating up most of the revenue of this quarter. What is encouraging is that while Blackberry may have made a loss in this quarter, it could have been a profit making had their service sales of $794m matched their $997m performance last year.

In sum, while a company making quarterly losses isn't the best news,  considering the measures Blackberry have had to take in streamlining their business and making it a leaner  and more effective operation, an $84m loss is a sign of progess. 



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