BlackBerry announces $US1 billion loss: Three of the company’s biggest mistakes

It’s not a good time for BlackBerry.

In fact, this could very well be the end.

After several years of poor results and sales, the company announced an expected, massive $1 billion quarterly loss over the weekend – and more than 4500 staff layoffs. That figure is nearly 40% of the company’s workforce.

“We are implementing the difficult but necessary operational changes announced today to address our position in a maturing and more competitive industry, and to drive the company toward profitability,” chief executive Thorsten Heins said in a statement.

Of the six handsets currently on offer, two will be scrapped.

The talk is now focused not on whether BlackBerry can survive, but who will buy it, and for how much? Early reports suggest that with patents and software technology the business could be worth as much as $US5 billion, but so far little has leaked.

But that wasn’t the only problem on the weekend. The company was preparing to release a version of its BlackBerry Messenger app for iOS and Android – but the rollout was halted because of an unofficial knockoff.

The New York Times has reported various private equity players are looking for a deal.

But such a fall from grace is hard to fathom, even in the middle of BlackBerry’s problems. Several years ago, the brand was huge and controlled the enterprise market. Every executive worth their salt had one, and the very name suggested power and authority.

Now, it’s all but disappeared.

So where did it go wrong? No doubt business analysts everywhere will look at BlackBerry as a case study for some time. So here are three key mistakes the handset maker made along the way.

1. It tried to become something it wasn’t

When Apple got to market first with the iPad, others tried to copy the device – and it’s only been within the past year or so that competitors have managed to get it right. BlackBerry wasn’t one of them.

The company spent millions of dollars on the PlayBook, which didn’t sell well at all and received mediocre reviews – which then prompted the company to reduce the price within six months.

BlackBerry was never a tablet maker, but it felt pressured to enter the market. As a result, it rushed out an inferior product.

BlackBerry made several mistakes – not understanding its core offering was one of them.

2. Innovation came too little, too late

Apart from simply misunderstanding how the smartphone market would be transformed by the iPhone – former chief Mike Lazaridis said the device wouldn’t appeal to enterprise – BlackBerry didn’t understand how to respond.

As a result, it created smartphones like the Z10. Touchscreen phones that were less powerful than competitors and way too late to market – the enterprise market had already been lost to Apple. Major customers like Halliburton and government departments started switching from the BlackBerry brand.

But the Z10 wasn’t just a lacklustre touchscreen phone – the company made entirely too many of them. The $1 billion loss announced over the weekend is almost entirely attributed to excess Z10 inventory:

“As a consequence of the more intense competition the company is experiencing in its hardware business, it expects to report a primarily non-cash, pre-tax charge against inventory and supply commitments in the second quarter of approximately $930 million to $960 million, which is primarily attributable to BlackBerry Z10 devices.”

Did BlackBerry over-estimate its reach? Absolutely – and it did so because it was simply too late to respond to market pressure.

3. A change of guard to nothing new

Back in December 2011, co-CEOs Mike Lazaridis and Jim Balsillie stepped down from their roles. They were replaced by current chief executive Thorsten Heins.

While some might have thought this move would introduce a new method of thinking for the company, they were wrong. In fact, Heins said the company was mostly doing okay.

In July of 2012, Heins said there was “nothing wrong with the company as it exists right now”.

If BlackBerry wanted to make a major change, they should have hired someone who felt the company actually needed changing.


Notify of
Inline Feedbacks
View all comments