December 20, 2013
BlackBerry Suffers Loss, Makes Five Year Deal With Foxconn
Peter Suciu for redOrbit.com – Your Universe Online
BlackBerry announced on Friday it has signed a five-year strategic agreement with Chinese-based consumer electronics manufacturer Foxconn, formerly known as Hon Hai Precision Industry Co, the well-known maker of high-end smartphones, including the Apple iPhone.
“Partnering with Foxconn allows BlackBerry to focus on what we do best – iconic design, world-class security, software development and enterprise mobility management – while simultaneously addressing fast-growing markets leveraging Foxconn’s scale and efficiency that will allow us to compete more effectively,” interim BlackBerry CEO John Chen said in Friday’s earnings statement, as reported by the Wall Street Journal.
This news comes as BlackBerry – formerly Research in Motion – announced a third-quarter 2013 loss of $4.4 billion, which included a write-down of assets. BlackBerry reported $1.2 billion in revenue for the quarter, which was down from $2.7 billion the year before. Adjusted losses from continuing operations were $354 million, or 67 cents per share.
However, the news of the Foxconn deal saw BlackBerry shares surge by 12 percent in afternoon trading.
This is the first quarterly report under new CEO John Chen, who took over last month for Thorsten Heins, and this follows a management shakeup at the Waterloo-based smartphone maker, which had been looking to sell the company. Last month, the board backpedaled from a deal to sell the company in favor of a $1 billion investment from Fairfax Financial Holdings.
In October, there was talk the once dominant company could be worth more broken up, and that various firms including Cisco Systems Inc., SAP AG and Samsung were even approached by BlackBerry advisors. Those companies only expressed interest in parts of BlackBerry, and any such breakup would allow individual parties to bid for BlackBerry’s most valuable pieces.
The once dominant smartphone maker has seen its market share erode in the last five years as a result of increased competition from Apple and Samsung. Earlier this year, Microsoft’s Windows Phone platform passed BlackBerry as the number three mobile operating system globally.
The Foxconn deal could be the company’s last, best hope to turn its downward slide around.
“This partnership demonstrates BlackBerry's commitment to the device market for the long-term and our determination to remain the innovation leader in secure end-to-end mobile solutions," added Chen.
The deal with Foxconn will allow BlackBerry to remain relevant in those noted emerging markets with lower cost smartphones. Under this deal, Foxconn will manage the production and inventory supply.
BlackBerry may have its work cut out for it in the developed world, including the North American and European markets.
“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,” Jack Gold of J. Gold Associates told the Financial Post. “The new management restricting will likely help, but the primary challenge is to stem the losses in devices and get more people interested in the higher end devices, which is not happening at the current time.”