BlackBerry mimicking Palm’s decline

blackberry1BlackBerry reported a more than 40% plunge in sales and vowed to cut a third of its workforce, raising concern that it’s on the same downward spiral as Palm, though without prospects for a last-minute buyer.

The company is eliminating 4,500 jobs and recording an inventory write down of as much as $960 million for the fiscal second quarter. The bleak results sent BlackBerry shares tumbling 17% and drew comparisons to Palm, another smartphone pioneer that fell out of favor with consumers. Like BlackBerry, that company attempted a comeback with a new operating system — only to see it fizzle with shoppers.

Palm was able to entice Hewlett-Packard into buying it in 2010, though that didn’t save the product line from being discontinued. “It reminds me very much of Palm,” said Keith Lam, managing partner with Red Sky Capital Management in Toronto. “HP tried to catch a knife buying Palm and it didn’t work out. So I’m not sure why anybody would step in here.”

BlackBerry said last month that it was forming a special committee to evaluate its strategic options, including a potential sale of the company. Finding a buyer may not be easy, though. JPMorgan Chase & Co and RBC Capital Markets spent close to a year quietly canvassing potential acquirers without success, people with knowledge of the matter said last month.

“That’s the nail in the coffin,” said Lam, whose firm manages C$220 million ($214 million). While Red Sky was a BlackBerry investor, it’s getting rid of its stake because of the results, he said. “There’s no point anymore.”

Chief Executive Officer Thorsten Heins was counting on the BlackBerry 10 phones — introduced in January to good reviews — to reverse a sales slide, return the company to profitability and make the brand hip again. Instead, its market share continues to slide and BlackBerry remains in the red.

The Canadian company said it will record revenue for sales of 3.7 million smartphones last quarter, mainly from earlier BlackBerry 7 devices. In all, 5.9 million smartphones were sold through to customers in the period, including ones shipped to carriers earlier, the company said.

BlackBerry is the biggest spender on research and development among publicly traded Canadian companies, according to data compiled by Bloomberg. That makes its employee base important for the nation’s economy.

Still, BlackBerry continues to offer new products. Earlier this week the company introduced the Z30, a model with the company’s largest screen yet. The device goes on sale in the UK and Middle East starting next week.

The smartphone maker previously hired Perella Weinberg Partners as an adviser to help explore its options, a person familiar with the decision said earlier this month.

Fairfax Financial, BlackBerry’s largest shareholder, has talked to Canadian pension fund managers to try and build support for a takeover deal. However, he hasn’t made much progress, the person said.

“It appears the only option BlackBerry has is to ultimately sell itself,” said Neeraj Monga, an analyst at Veritas Investment Research Corp. in Toronto. “But it seems nobody’s stepping up to the plate.”

source : Times of India