BlackBerry Teams With Foxconn, Announces $4.4B Loss

Part of BlackBerry's plan for turning things around is letting Foxconn take on major design, manufacturing, inventory and logistics responsibilities.

BlackBerry announced a $4.4 billion loss for its fiscal 2014 third quarter, which ended Nov. 30. But, under new CEO John Chen, it also began to share its strategy for bringing the business back to profits. Part of that strategy is a five-year deal with Foxconn, which will jointly design and manufacture devices with BlackBerry, as well as manage BlackBerry's device inventory and the logistics of its supply chains.

Foxconn will develop and manufacture the new BlackBerry smartphones in its facilities in Mexico and Indonesia, and BlackBerry will own all of its intellectual property and perform product assurance checks on all devices, it said, as it currently does with all third-party manufacturers.

"Going forward, we have a reasonable plan," Chen said on the company's Dec. 20 earnings call. "We have a clean balance sheet, we're strong in cash, we're no longer worried about whether we're going to be around [in the future]. We have some areas to beef up ... but we've taken away the biggest chokehold of the last few years and we're ready to fight back."

Chen added that, "for the foreseeable future," BlackBerry designers in North America will focus on enterprise-focused handsets for North America only. ("That's not to say we won't focus more on consumer devices later," he added.) Foxconn will work on designing smartphones for identified emerging markets—Indonesia is one of them—with the first phone coming out in the March-April time frame.

"I already have one in my hand right now," Chen said, suggesting how far along in the process the plan is.

Foxconn, the largest manufacturer of electronic devices in the world, joined the mainstream consciousness in 2010, after at least a dozen employees tried to kill themselves on one of its campuses, and later the conditions around workers building Apple products were questioned.

Terry Gou, chairman and founder of Foxconn, said in a statement that he's looking forward to working with BlackBerry, "an iconic brand with great technology and a loyal international fan base," as it "positions itself for future growth."

Emerging markets have been something of a saving grace for BlackBerry, as its sales and income have plummeted. During the quarter, BlackBerry sold 4.3 million BlackBerry smartphones—its lowest sales figure since 2006. Of those devices, 3.2 million were running the company's old operating system, BlackBerry 7.

"This is troubling, since lower-end devices also have lower margins," J. Gold Associates Principal Analyst Jack Gold said in a note following the call. "It also indicates that most of the devices went into emerging markets, thereby indicating that mature markets continue to move away from BlackBerry adoption."