(Getty/AFP, Joe Raedle)
AFP – BlackBerry shares staged an unexpected rally last Friday after news of a record loss from the struggling smartphone maker was offset by an announcement of a manufacturing partnership with Taiwan-based Foxconn.
The Canadian firm reported a massive $4.4 billion loss in its third quarter, four times higher than in the previous quarter, as smartphone sales slumped by half.
BlackBerry shares surged 15.52 percent to end the day at $7.22.
Analysts said the company’s turnaround efforts could get a boost from the five-year partnership with Foxconn, described as “the world?s largest manufacturer of electronic products and components.”
Foxconn will develop and manufacture a number of new devices and help manage inventory — an area where BlackBerry has struggled. Foxconn, the marketing name for Hon Hai Precision Industry Co., is also a supplier for one of BlackBerry’s chief rivals — Apple.
Analyst Colin Gillis at BGC Financial said the announcement of the partnership and a new organizational structure at BlackBerry were helping “to focus resources on its remaining strengths.”
BlackBerry’s new divisions are for enterprise services, messaging, embedded technology including automotive, and devices such as phones.
“Enterprise services are first and devices are last,” Gillis said, commenting on the order of the units announced by BlackBerry.
Gillis said the share price rallied because “any sign of a business plan that may slow the destruction of capital could be seen as a positive.”
The Foxconn partnership, according to BlackBerry, demonstrates its long-term commitment to smartphones, after speculation that it might abandon device sales.
This frees BlackBerry to focus on its software and services, which it hopes to also offer to Apple and Android users, said chief executive John Chen.
Their first joint smartphone product is scheduled to be unveiled in March or April, he told a conference call.
The Waterloo, Ontario-based firm attributed the extent of its quarterly loss to a $4.6 billion charge for an inventory write-down and other one-time costs.
But the company is also seeing plummeting sales, with third quarter revenues of just $1.2 billion, 56 percent lower than a year earlier.
The results were “worse than depressed expectations,” commented RBC Capital Markets analyst Marc Sue.
The company sold just 1.9 million smartphones in the quarter, nearly half the figure from the previous quarter, suggesting the release of the Z10 handset — a touchscreen device launched this year and aimed at competing against Apple and Android rivals — has failed.
But the company said that 40 million new iOS/Android users have already registered over the past 60 days to use its messaging system.
This was the first financial report since Chen was slotted into BlackBerry’s top job last month, in a management shakeup that also saw several top executives depart.
Chen said BlackBerry’s enterprise services for organizations and its messaging products are in good shape, and its “most immediate challenge” is to turnaround its handset business, “to make sure that we don’t lose money from the device business.”
“We have accomplished a lot in the past 45 days, but still have significant work ahead of us as we target improved financial performance next year,” Chen said.
The chief executive said BlackBerry is “financially strong” with $3 billion in cash and has “a broad and trusted product portfolio to work with.”
In September, the company announced that it was laying off 4,500 staff — or one third of its global workforce — after losing $965 million in its second quarter.
BlackBerry helped create a culture of mobile users glued to smartphones, but lost its luster as many moved to iPhones or devices using Google’s Android software.
BlackBerry still has some 70 million subscribers worldwide, but most of these are using older handsets, with newer devices on the BlackBerry 10 platform unveiled in January failing to gain traction.
Technology analyst Jack Gold said the partnership with Foxconn should help BlackBerry “both financially by lowering costs and with new designs for the emerging markets where they still have a major presence.”
But he noted that the company “still has a way to go to achieve turnaround.”
