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BlackBerry filing describes a global slide

BlackBerry filing describes a global slide

By Ian Austen, The New York Times | Updated: 3 October 2013 11:04 IST

In a delayed regulatory filing issued Tuesday evening, smartphone maker BlackBerry revealed that customers are turning against its products in what had been its one remaining bright spot, the developing world.

"The intense competition impacting the company's financial and operational results that previously affected demand in the United States market is now being experienced globally," the troubled company said, "including in international markets where the company has historically experienced rapid growth."

The company attributed its slowdown in those markets to an increase in inexpensive phones based on Google's Android operating system. But it also cited a factor behind its severe decline in the United States: the relative paucity of desirable software apps for its phones.

The information was contained in a written discussion from BlackBerry's management of the company's financial results for last quarter. Normally, it would have been included in those results, which were issued Friday. But BlackBerry delayed its release and canceled a customary conference call with analysts, citing a highly conditional, nonbinding bid from its largest shareholder, Fairfax Financial Holdings of Toronto.

Despite BlackBerry's reversal in developing markets, the company said sales in Europe, the Middle East and Africa overtook those in the United States. The company's North American sales were $414 million, or 26 percent of its revenue for the period. The region including Africa brought in $686 million, about 42 percent.

The company Friday reported a loss of nearly $1 billion for the quarter, much of it coming from a write-down on its inventory of new phones using the BlackBerry 10 operating system (Review) Those phones were supposed to be potent competitors against Android phones and Apple's iPhones.

The regulatory filing details the fall of BlackBerry's hardware business. During the quarter, phone sales declined by $942 million, or 55 percent, compared with the same period a year earlier. Although most of the BlackBerrys sold during the quarter were older models using the BlackBerry 7 system, the company affirmed plans to discontinue them to focus on four versions of the new phones. The BlackBerry Z10 (Review I Pictures), which introduced the new line in January, will be downgraded to become the company's low-priced touch-screen phone, it said.

Because BlackBerry uniquely runs a global network that handles data from all of its older models as well as some BlackBerry 10 phones, the company also has a highly profitable services business. But that segment did not escape decline, falling 27 percent to $724 million. Its performance was slightly improved by $25 million in delayed payments BlackBerry collected from wireless carriers in Venezuela. That money had been blocked by Venezuela's foreign exchange regulator.

While the company has repeatedly boasted about the number of corporations that have downloaded its new corporate server software, it acknowledged in the filing that far fewer of them than expected had decided to purchase the software and related services after testing it.

The filing suggests that BlackBerry will still go ahead with its plans to lay off about 40 percent of its remaining staff, about 4,500 people, despite the Fairfax bid. The company indicated that it expected to post about $400 million in charges related to those layoffs during its current fiscal year, up from a previous estimate of $100 million.

(Also see: End of an era as BlackBerry looks to go private)

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