BlackBerry to Cut 40 Percent of Staff by Year's End: Report
BlackBerry is preparing to let go of up to 40 percent of its staff, or potentially up to 5,000 people, by the end of the year, The Wall Street Journal reported Sept. 18, painting a grim picture of how far the once-leading smartphone maker has fallen.
Two years ago, BlackBerry had more than 17,000 employees and a 14 percent share of the U.S. smartphone market, the report added. Currently, it has fewer than 13,000 employees and less than 3 percent of the U.S. market.
During BlackBerry's prime—the years before the iPhone's introduction—it held a nearly 60 percent share of the U.S. market. And even during the third quarter of 2008, when Apple's share of the U.S. market spiked for the first time to 30 percent, BlackBerry held a 40 percent share, a low it had dipped to only once since its 2004 introduction.
"We are in the second phase of our transformation plan. Organizational moves will continue to occur to ensure we have the right people in the right roles to drive new opportunities in mobile computing," a BlackBerry spokesperson told eWEEK.
Gartner Research Vice President Carolina Milanesi suggested the cuts were about more than creating planned, internal efficiencies.
"It is all about making BlackBerry more attractive to buyers, and this is how it should be read—versus cutting costs in a way a company would do when still trying to fight," she told eWEEK. "It's a very different move at this point in the game."
On Aug. 12, BlackBerry confirmed its interest in "strategic alternatives," which it said in a statement could include "possible joint ventures, strategic partnerships or alliances, a sale of the company or other possible transactions."
Four weeks later, Reuters reported that interest in the Waterloo, Ontario–based company was "tepid," with companies more interested in buying off parts and equity firms taking meetings with BlackBerry to gain access to its books.
"Once BlackBerry went up on the block, it began to lose value like a deflating birthday balloon," said Roger Kay, principal analyst with EndPoint Technologies.
While BlackBerry surprised analysts in March by posting a fiscal 2013 fourth quarter that closed with a profit, it still lost 3 million customers and finished the full year in the red. During the quarter that ended in June, the company posted an $84 million loss, and it expects to share news of more losses when it announces earnings Sept. 27.
Ken Hyers, a senior analyst with Strategy Analytics, called the upcoming cuts "entirely rational," as BlackBerry preps for a sale.
"The danger for BlackBerry is that cuts will be so deep that they're to the bone, cutting the intellectual capital the company would need to continue to operate long term," Hyers continued. "It those cuts come from non-engineering, operations or development areas, however, the reductions would be attractive to a potential buyer that would in any case anticipate cutting extraneous or redundant staff."
In 2011 and again in 2012, BlackBerry laid off several thousand employees in efforts to minimize costs. The 2012 cuts included 5,000 employees over the course of three quarters. During a June 2012 earnings call, CEO Thorsten Heins announced the pending cuts, which would save the company $350 million, as part of a larger effort to slash costs by $1 billion.
"It is necessary to change the scale and refocus the company," Heins said during the call, regretting how the job cuts would affect employees and their families. "I assure you that we wouldn't move forward with a change of this size if we didn't think it was critical for our future."
News of the impending cuts broke as BlackBerry, with near-nonexistent fanfare, introduced its fourth BlackBerry 10-running smartphone, the Z30, featuring a 5-inch touch display, an improved antenna and a new Priority Hub.
BlackBerry Executive Vice President Carlo Chiarello said the Z30 rounds out the BB10 portfolio and is designed for those who want a smartphone that "excels at communications, messaging and productivity."
The Z10 is scheduled to roll out next week in select markets and expand to additional markets in time for the holiday season.