BlackBerry job-cut costs quadruple

Home > Business > Industry

print dictionary print

BlackBerry job-cut costs quadruple


BlackBerry, the smartphone maker seeking to sell itself, will record costs of about $400 million, four times the amount it originally projected, as the company cuts staff by 40 percent and sells equipment and real estate.

The expenses cover the cost of firing 4,500 workers, a move that will reduce BlackBerry’s staff to about 7,000 people, the company said in a regulatory filing late yesterday. As part of its cost-cutting plan, BlackBerry plans to unload factories, manufacturing gear and property. Those assets will be listed separately on its balance sheet until they are sold.

BlackBerry, coping with plunging sales and mounting red ink, is streamlining the business as it looks to seal a $4.7 billion buyout deal with its largest shareholder, Fairfax Financial Holdings. The company agreed to the tentative offer last month after years of losing ground to Apple and Samsung Electronics. In addition to the job cuts, BlackBerry is writing down unsold phone inventory by almost $1 billion.

Even with the cuts, reaching the break-even point again will be a challenge, said Steven Li, an analyst at Raymond James Ltd. in Toronto. The company’s lucrative services business, which supports corporate customers’ wireless devices, continues to decline, muddying the picture.

“We think profitability could remain elusive,” Li, who has the equivalent of a hold rating on BlackBerry shares, said today in a report.

Shares of Waterloo, Ontario-based BlackBerry were little changed today, closing at $7.96 in New York. The stock price is trading more than a dollar below the $9-a-share offer price, an indication that investors have doubts about the deal.

Fairfax, a Toronto investment company run by Prem Watsa, hasn’t revealed the names of other buyers in its takeover consortium, raising concern that broader support for the transaction won’t materialize.

Aside from Fairfax, the private-equity firm Cerberus Capital Management has expressed interest in BlackBerry, according to a person with knowledge of the matter.

Cerberus is looking to sign a confidentiality agreement with BlackBerry that would give it access to additional financial data, said the person, who asked not to be identified because the negotiations are private. Cerberus’s interest in BlackBerry, which may not lead to a bid, was reported earlier by the Wall Street Journal.

Adam Emery, a spokesman for BlackBerry, declined to discuss any talks that may be under way.

“We do not intend to disclose further developments with respect to the process until we approve a specific transaction or otherwise conclude the review of strategic alternatives,” he said.

The burgeoning restructuring costs signal that BlackBerry’s turnaround will be more extensive than expected. And even with the latest cuts, analysts are unsure just how small the company ultimately may get.

Jabil Circuit, an electronics supplier for BlackBerry, said last week that it would probably sever ties with the company in the coming months. That fueled speculation that BlackBerry may stop making phones altogether and become a wireless-services business. Bloomberg


More in Industry

Work at home is not as easy as it sounds, ministry says

Flying visit

[NEWS IN FOCUS] Spotify is still almost here, and seems to be getting closer

Korea Inc. calls on Suga to relax border restrictions

House-bound consumers awaken a sleeping industry

Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)

What’s Popular Now