Blackberry (NASDAQ:BBRY) (TSE:BB) reversed sharp losses on Wednesday after a Wall Street Journal report said private equity firm Cerberus Capital Management was interested in buying the Canadian smartphone maker, and was planning to sign a confidentiality agreement to assess its books.
The Waterloo, Ontario based company signed a non-binding letter of intent with a consortium led by Fairfax Financial Holdings (TSE:FFH) last month, in a deal worth $9 a share, or $4.7 billion.
Shares of Blackberry bounced back, rising more than 1.3 percent in late afternoon deals, to $8.3 in Toronto, after sinking to a day low of $7.75 after saying the cost of reworking its operations might be four times as much as it estimated earlier this year and may become even higher than that.
Blackberry said it expects to incur charges of $400 million through the rest of the fiscal year ending in May, up from $100 million, as part of a broad cost-cutting initiative that includes slashing 40 percent of its workforce and a nearly $1 billion writedown in unsold phone inventory, the Waterloo, Ontario-based company said in a filing with the Securities and Exchange Commission published yesterday. Those charges could increase as the company looks to trim even more costs this year and next, it acknowledged in the filing.
The company also painted a stark picture of its core business: selling phones and services to other companies.
It said monthly service revenues are expected to decline further in the fiscal third quarter, though not at the escalated rate experienced in the fiscal second quarter. The company said service revenue dropped about 27 per cent to $724 million in the three months ended Aug. 31. It expects service revenues to fall another 12 per cent in the third quarter.
Earlier this year, Blackberry said it would likely book $100-million in charges through its fiscal 2014 year, as it cut back staff and reduced other costs. Since then, the company’s financial results have weakened, mostly on poor sales of its Blackberry Z10 touchscreen phones.
On Sept. 27, the company booked a $965-million loss for its fiscal second quarter and announced the massive layoff that will extend into next year.
“Other charges and cash costs may occur as programs are implemented or changes completed,” the company said in the financial documents.
Source : Proactiveinvestors
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