BlackBerry Blames Z10 Flop for Fiscal Q2 Loss; CEO Says He's "Very Disappointed"

The company only raked in $1.6 billion in revenue for the fiscal quarter

BlackBerry keeps slipping further and further into the dark abyss that is the end of its life, and its second-quarter earnings further prove that point.

For fiscal Q2 2014, BlackBerry reported only $1.6 billion in revenue, which represents a $2.9 billion drop from the year-ago quarter. Analysts expected nearly twice that amount before receiving a warning just last week.

The company had a Q2 net loss of $965 million, or $1.84 a share. It had predicted a loss of $950 million to $995 million prior to the earnings release. Overall, BlackBerry lost $248 million, or 47 cents a share (analysts forecast a loss of 49 cents a share).

This leaves the Waterloo, Ontario-based company's cash pile at $2.6 billion at the end of the quarter, which is down from $3.1 billion.

To make matters worse, BlackBerry said it sold 5.9 million smartphones, but only recorded revenue on 3.7 million. Many were older BlackBerry devices.

BlackBerry reported a total GAAP loss of $965 million from continuing operations, which was due to a writedown of nearly $1 billion thanks to unsold Z10 smartphones. The Z10 was released as BlackBerry's first flagship device in the BlackBerry 10 (BB10) line earlier this year.

BlackBerry CEO Thorsten Heins wasn't pleased with the financial results of his company.

^{Blackberry Z10}

"We are very disappointed with our operational and financial results this quarter and have announced a series of major changes to address the competitive hardware environment and our cost structure," said Heins.

"While our company goes through the necessary changes to create the best business model for our hardware business, we continue to see confidence from our customers through the increasing penetration of BES 10, where we now have more than 25,000 commercial and test servers installed to date, up from 19,000 in July 2013. We understand how some of the activities we are going through create uncertainty, but we remain a financially strong company with $2.6 billion in cash and no debt. We are focused on our targeted markets, and are committed to completing our transition quickly in order to establish a more focused and efficient company."

It's no secret that BlackBerry has been struggling. The company was once a big player in mobile, but has hit rock bottom after failing to compete with Apple's iOS and Google's Android. In 2011, BlackBerry had 14 percent of the U.S. smartphone market, and now, it has less than 3 percent.

Earlier this week, BlackBerry signed a letter of intent agreeing to a sale of the company valued at $4.7 billion to a consortium led by its largest shareholder -- Fairfax Financial Holdings Ltd., which owns 10 percent of BlackBerry. This deal, which would be completed November 4 after a due diligence period, would ensure that BlackBerry goes private. Additionally, each shareholder would receive $9 per share in cash.  

BlackBerry employees are feeling the heat, too. The company said it will cut 4,500 jobs (as of March, BlackBerry had 12,700 employees).

Source: Market Wired

Bill Gates Regrets CTRL+ALT+DEL

"If I ever meet you, I'll CTRL+ALT+DEL you!" -- Weird Al Yankovic

At a Harvard Univ. Q&A session this week, Microsoft Corp. (MSFT) cofounder and former CEO Bill Gates spoke on a broad range of topics, but the highlight came when he mentioned CTRL+ALT+DEL -- the key combination that used to be required to log onto windows.

Asked by Harvard Campaign chair David Rubenstein, "Why, when I want to turn on my software and computer, do I need to have three fingers on Control, Alt, Delete? Who’s idea was that?"

... Mr. Gates quipped, "It was a big mistake."

The former CEO says he would have preferred a one-button login, but the International Business Machines Corp. (IBM) employee who designed the keyboard preferred the three button solution.  He explains:

You want to have something you do with the keyboard that is signaling to a very low level of the software — actually hard-coded in the hardware — that it really is bringing in the operating system you expect, instead of just a funny piece of software that puts up a screen that looks like a log-in screen, and then it listens to your password and then it’s able to do that.

But as PCWorld points out, if it was a mistake it was a fortunate one as it prevented a trojan from faking the log in screen.  The site writes:

Why? Because, as insecure as some perceive the Windows operating system to be, it could have been a thousand times worse if there were no keyboard interaction required to log on. That physical interaction tells the computer that you want to interface with the Microsoft Windows operating system, and ensures that rogue or spoofed software can't dupe users into typing usernames and passwords.

Others have defended the famous three button combination -- oft associated with errors and OS crashes in early Windows computers -- as being a key part of 90s nostalgia.

Even Weird Al Yankovic paid tribute to the shortcut in his song All About the Pentiums blasting, "If I ever meet you, I'll CTRL+ALT+DEL you!"

Microsoft CEO Steve Ballmer Gives Emotional Goodbye Speech at Final Meeting

It was his last company meeting as CEO

Microsoft CEO Steve Ballmer attended his very last company meeting as leader of the Redmond, Washington-based company, giving an emotional goodbye speech and his usual energetic dancing.

Ballmer took the stage at Seattle's KeyArena in front of about 13,000 Microsoft employees to give one last performance as CEO. He came onstage while "Can't Hold Us" by Macklemore and Ryan Lewis played over the speakers.

He gave a speech about an hour long, with tears streaming down his face at points. He discussed his time at Microsoft, the deal with Nokia and handing the torch over to a new CEO.

"I want to say thank you…this isn't about any one person," said Ballmer. "It's about a company that's important, that's forward thinking, that's innovative.

"We will deliver the next big thing...we will change the world again."

Ballmer managed to take a few jabs at the competition as well, describing Apple as being "fashionable," Amazon as being "cheap," Google as "knowing more," but Microsoft as "doing more."

He departed the stage to Michael Jackson's "Wanna Be Startin' Somethin'," which is the song that played at Microsoft's first employee meeting in 1983. "(I've Had) The Time of My Life" by Bill Medley and Jennifer Warnes played afterward, as Ballmer sang and danced along.

"You work for the greatest company in the world, soak it in," said Ballmer before exiting the stage. "I believe in you, I believe in the mission. We've been a great company for years. We will be a great company for many more years."

Ballmer joined Microsoft on June 11, 1980 as the company's 30th employee and the first business manager hired by Microsoft Chairman and Co-Founder Bill Gates. Even though Ballmer has been a public figure for Microsoft for many years, some believe the company is in need of an executive shake-up -- including a new leader.

Ballmer announced last month that he plans to retire sometime over the next year. The company is currently undergoing a major restructuring plan that will unify devices like Windows Phone, PC and Xbox One. 
Sources: The Verge, Reuters

How the Mighty Fell: Sales of RIM, Palm Stands as Cautionary Tech Tales

RIM's sale makes a breakup highly likely as sales are dead in the water

Since 2010, we've been writing about the slowly unfolding train wreck that is BlackBerry, Ltd. (TSE:BB), aka. the phonemaker formally know as "RIM".

I. Ground, Sweet Escape Lie in Sight for the RIMdenberg

The roots of the RIMdenberg disaster (or BlackBerry burnout?) lay in a pair of incompetent managers who were skilled at delivering communications clients, but were unable to deliver when the smartphone was called upon to do more.

In many ways, the BlackBerry story resembles that of Palm -- a pioneering firm that experienced wild success only to crash and burn hard as the market it fostered matured.
 

_{The RIMdenburg made its final descent after holding on for so long.
[Image Source: Jason Mick/DailyTech LLC]}

BlackBerry smartphones launched in 2000 with the BlackBerry 957.  At the time, BlackBerry was the primary peddler of push email -- a service that delivered messages to customers far faster than the polling email (POP) clients that dominated rival devices at the time.

RIM saw strong success with its Pearl smartphones, which launched to the consumer market in 2006 and the Curve family that launched in 2007.  Both families featured basic cameras and media capabilities -- pretty much all that you could ask for in a smartphone at the time.


II. Palm Travelled This Road as Well

When Apple, Inc. (AAPL) launched the iPhone in 2007, it was just a curiosity.  Nokia Oyj.'s (HEX:NOK1V) Symbian was the top platform in smartphone sales volume at the time, but RIM was widely regarded as the smartphone of choice for business and creative leaders.

Palm meanwhile was seeing similar success, albeit never scoring as lucrative business deals as RIM's massive contracts.  Some of Palm's biggest earnings came not from its own devices, but from products that outside observers often think were invented by others, including:

• Graffiti handwriting recognition software (licensed by Apple for use on the Newton tablet/PDA)
  
  
  _{Palm software defined Apple's Newton. [Image Source: 20th Century Fox]}
   
• PalmPilot Desktop/Palm Desktop synchronization software for Hewlett-Packard Comp. (HPQ) and other pocket-PC makers' PDAs.

In 2000, despite going through a mess of owners, Palm's initial public offering saw frenzied buying that valued it at $54B USD.  But the 2000s were cruel to Palm, which declined in influence even as
BlackBerry's market cap waxed.

III. webOS -- Palm's Rendition of BB10

To be fair, Palm appeared to recognize its fate far sooner than BlackBerry.  In 2009 it went through a last dish push to reinvent itself in the modern smartphone market, releasing webOS.  At the time Palm was viewed as a serious competitor to Apple and the new kid on the block -- Google Inc.'s (GOOG) Android.

Palm's webOS shown flashes up brilliance, but Palm and RIM has a fatal flaw in common -- they both suffered from a sluggish pace of product development.  Palm's product wasn't bad -- but the Palm 2 and Pixi were more minor revisions than a necessary upgrade.

_{The BB Storm brings back not-so-fond memories for me. [Image Source: BB]}

RIM made a few half-hearted attempts at a full-touch device, but the results were appalling bad (trust me I owned one -- or shall I say three, given that two were warrantied out due to hardware failures before my third Storm decided to kick the bucket leading me to buy an HTC Corp. (TPE:2498) Evo 4G instead).

_{A fire sale to HP failed to save Palm. [Image Source: GigaOm]}

Palm's John Rubenstein failed to develop a clear vision for the company, which plodded close to bankruptcy until it was bailed out in a $1.2B USD fire sale to HP in 2010.  For a brief instant it looked like the experiment might succeed -- in Feb. 2011 HP prodded its new unit to pick up the product pace and two smartphones, plus a tablet were announced.  But amid weak sales, HP lost its confidence in its fixer-upper and simply yanked it off the market.

IV. RIM "Hits the Brakes"

Meanwhile, RIM's momentum in the smartphone market was gradually slowing.  After hitting $83B USD in market capitalization in June 2008, RIM shares began to retreat, as investors perhaps sensed the company was stalling as an innovative force.  Worse still, RIM's co-CEOs seemed somewhat oblivious to this development. In 2009 Mike Lazardis told a Fortune reporter in an interview, "Sometimes we have to put the brakes on.  We've shown that we can handle annual 100% growth. I'm not sure we could handle more than that."

Indeed sales continued to climb through 2010, even if share prices didn't follow in suit.  But by 2011, the foot began to drop on the brakes and the RIMdenberg teetered from upon its lofty heights.  RIM had promised something big -- a brand new OS dubbed "BlackBerry 10" by holiday 2011.  That date slipped.  A few months later, co-CEOs Mike Lazaridis and Jim Balsillie were shown the door, but that did little to halt RIM's burning descent.

_{Droves of clients are dumping BlackBerries. [Image Source: LihPao]}

RIM's new CEO, Thorsten Heins wasn't much better than his predecessors at pushing out BB10.  It ultimately took him another five more quarters before BB10 finally rolled out in the U.S. March 2013.

V. RIM -- a Final Girl in the Face of the BlackBerry Sales Bloodbath

When BB10 finally arrived, it felt eerily familiar to me.  It was like listening to the plaintive webOS swan song all over again.  Like webOS, BB10 was much overdo and had elements of brilliance, but lacked the firepower needed to change the minds of consumers who had long ago relegated BlackBerry to the scrap heap.

Still, much like with Palm, RIM (now BlackBerry Ltd. (TSE:BB) seemed to linger on quietly in its final days.  Much like a horror movie where you spent hour seeing everyone die, but the final girl survive, you almost thought that RIM might get away.

In 2012 I tried to explain the reality of RIM's decline, writing:

With RIM I'm not by any means trying to "troll" the company, and I constantly point out that it is still profitable. That said sales are dropping (U.S. and overall global), the brass posted a gloomy 2012 outlook, and BB 10 is late.

I'm glad to see there's some good notes and to hear a bit more about why the Torch 2 is worthwhile.

But ultimately I'm reminded of the Palm situation -- one where some customers swear by the product and point to its merits, while the majority dismiss it.

To be fair, BB proved far more capable of convincing tops shareholders foolishly not sell than I had expected.  

_{RIM held on for longer than many of us expected [Image Source: BGR]}

In mid-2012 I wrote:

Regardless, if there's one thing that's clear it's that a sale of RIM is likely coming soon.  It seems unlikely that RIM will survive to see its ever-slipping operating system arrive.

Investors will surely be eager to salvage what little they can from the company.  The company does have some decent assets -- namely its large intellectual property portfolio, its recognizable business brand, and its superb physical keyboard mastery.

Ultimate BB held on.  But after a confidence devastating $1B USD loss and abysmal sales in the last quarter investors finally successfully pressured BB to throw in the towel.

I'll admit -- I was a bit shocked.  After seeing BB survive for so long, like that final girl, it was a real shock to see it sold at last.  It was both utterly surprising and utterly predictable all at the same time.

VI. Cautionary Tales for Those Who Follow

Fairfax Financial Holdings Ltd. (TSE:FFH) has received a tentative agreement to buy BB for $4.7B USD.  And that may be all she wrote for BlackBerry.  In an interview with The Financial Times Fairfax CEO Prem Watsa cheers, "Rest assured when we do this it won’t be done to split the company.  I mean one of the reasons I went on the board, and I said it publicly, was to keep the company in Canada and to make sure it survives and exists in Canada. It is one of Canada’s most successful companies. Companies do fall on hard times and they come back again and we expect this company to do the same."

_{Prem Watsa claims he won't break up BB, but then he went on to say that he might -- hmm.
[Image Source: The National Post]}

It wouldn't be surprising see this billionaire angel investor and BB malinger about for a bit longer.  But the reality is after losing hundreds of millions on BB Mr. Watsa may be looking to cash out via sales of BB's rich intellectual property portfolio and enterprise business units.  The article closes with the comment:

He said all possibilities are open including getting out of the hardware business and changing the CEO. He said he’s a fan of CEO Thorsten Heins and thinks he’s done a very good job, but said he was handed a tough job when he took over in early 2012. “We have to in this due diligence look at all of these things,” Watsa said.

Not if, but when the coffin is nailed shut on BlackBerry, it should be marked as a cautionary tale of how even the mightiest can fall if they let stop innovating.  Together RIM and BlackBerry were once worth $137B USD at their respective peeks.  Now Palm is gone and BB is worth $4B USD and fading fast.

Companies like Apple or Microsoft Corp. (MSFT) may be sitting on seeming invincible cash piles -- and to be fair their hordes are much larger than anything BlackBerry or Palm ever clutched -- but Palm and BB/RIM illustrate that in time even they could fall, should they fail to keep up with market trends.
Source: Fast Company

Lenovo CEO Shares Bonus with Workers for a Second Year

Payouts will be about $325 per worker

Computer maker Lenovo has reported that its CEO Yang Yuanqing plans to share at least $3 million of his bonus with workers for the second straight year. Lenovo posted record sales for the year and the company’s CEO plans to spread his bonus amongst 10,000 workers with payment amounts going to recognize worker contributions.

Lenovo spokesperson Jeffrey Shafer said that the total amount the CEO paid out would be about $3.25 million, up from $3 million last year.

“This is quite rare, especially for a chairman of a Chinese company, to use his personal money as a bonus to reward employees,” said Kirk Yang, a managing director at Barclays Plc in Hong Kong.

^{Lenovo CEO Yang Yuanqing}

The shared wealth will be handed out to Lenovo staff in 20 countries with about 85% of those receiving money located in China. The average payment to individual workers at Lenovo will be around $325. While that may not sound like a lot of money, it is equal to about one month's pay for the typical city worker in China.

Lenovo currently has more than 35,000 employees around the world as of the end of March.

Source: Bloomberg