It’s unfortunate, but layoffs at BlackBerry are essential to their financial health

By Chris Umiastowski on 18 Mar 2014 02:39 pm EDT

Yesterday CBC posted a story confirming additional job cuts in Waterloo. In this most recent example, BlackBerry is eliminating 120 jobs from the company’s product development and wireless teams.

BlackBerry claims these cuts are part of the broader 40% staff reduction announced last September. We have to keep in mind that it takes quite a while to implement major staff cuts, so it’s entirely believable to me that this is truly part of last fall’s plan.

Back in September I didn’t write the most sensitive of headlines, I admit, but I still feel very much like these job cuts are a good thing. They’re necessary for the financial health and stability of the company. I’ve seen a LOT of friends lose their jobs over the last 15 years. I’m saying this as a guy who started his career as an engineer in the telecom industry in 1996. Things were great for about 4 years and then the meltdown began. Maybe I’ve become numb to the pain of seeing people lose their jobs but I very much believe most people are better off afterwards. People bounce back. People get stronger.

I fully expect the company’s employee count will continue to drop. It doesn’t have to come from layoffs. Big tech companies that reduce headcount typically see it happen through a mix of cuts and attrition.

Also remember that BlackBerry’s September job cut announcement meant that the firm could cut down to about 7600 employees. At the time, Facebook had 5300 employees. BlackBerry isn’t going to focus on building (much) hardware anymore. They’ve outsourced a lot of the work to Asia via Foxconn. If BlackBerry is going to refocus primarily on software and services, I can’t imagine how they need anywhere close to the number of employees as Facebook, a social network that powers well over a billion users.

I fully expect the company’s employee count will continue to drop. It doesn’t have to come from layoffs. Big tech companies that reduce headcount typically see it happen through a mix of cuts and attrition.

It needs to happen if the company is going to return to the healthy financial condition that we all want to see.

To throw some numbers out there, let’s say sales continue to decline to $800 million per quarter before they stabilize. Gross margin let’s imagine the company stabilizes around $4 billion per year in revenue. Let’s speculate that the revenue mix is $300 million in hardware at 25% margin and $500 million of software & services at 80% margin. This would give us gross margin of about $475 million.

That $475 million is how much they’d be able to spend on operating the business if they wanted to be at break-even or better. Guess how much they spent last quarter? R&D and SG&A were a combined total of $865 million.

Obviously I don’t know where revenues will stabilize, and I’m sure John Chen has a much better idea of where things stand compared to me. But BIS (BlackBerry Internet Service) revenue is still in decline as the traditional subscriber base either churns to BB10 or away form the platform, and it’s going to take some time before all of the enterprise (BES) initiatives offset this.

It’s pretty clear to me that significant operating expense cuts are still coming. Remember that these are not leading indicators, they are lagging indicators. When the news hits this is not bad news. This is a reminder of past bad news, and it’s a signal that action is being taken to get back to health.

BlackBerry reports its next set of quarterly results next week on March 28th.

Topics: BBRY Editorial

Reader comments

It’s unfortunate, but layoffs at BlackBerry are essential to their financial health


Umi... isn't it a "good thing" that BlackBerry has not "pre announced" a disasterous quarter at this point? Or, does it not matter?


Agree. I remember previous Quarters whether they be positive or negative, they always announced a warning of some sort.
Perhaps the numbers are better than most think. For me, I am curious with the BES10 numbers, because almost every day for the past few months we keep hearing companies going all out with BB10 and BES10.

While it would be nice to have better numbers, it wouldn't affect me one way or another. BB can be profitable is they downsize their company to match their sales. As long as they keep releasing quality products that meet me needs, I'm happy.

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Just when I thought all the cuts that needed to take place already happened, looks like we're not quite there on the yellow brick road. Where is the wizard?

March 28 sounds like a fun day to stick around

Posted by the Crackberry Pirate

Chris, great perspective on employee cuts especially the Facebook comparison. I did not see it this way at all because the media left out some truth. I was led to believe Blackberry was cutting a large number of employees of around 40% not realizing what this percentage means, I assumed a lot. I didn't know Blackberry had that many employees in the first place. After reading your article, I'm sorry to hear about the job loses but I'm glad Blackberry is doing what it needs to do to survive in this hard time. It still baffles me why the media have a personal interest in bringing Blackberry down. It's like they have an agenda.

Well I guess it has to happen sometime. It really does suck hearing this but it's a necessity for a turnaround imo.

Powered by BlackBerry (Z10). Join my #BBM Channels C001227CF, C00476C37, C003829C9, C002454C9,C002190AC, C00120CE3

But why is this all over media? Is this the only company or IT company in Canada??

I don't like how this is been spinning for the last few months

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Just pray for any man or woman that lost his job. I have faith that in this ugly moment of the life of everyone whose lost his job, they will find another better, and learn something good in this critical moment.

God Bless You!

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It's the right move, but unfortunately for those affected.


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How about hiring some web sales folks so we can buy a Z30 here in the USA for any of the carriers! What is the point of having devices if we can't even buy them.... That's AT&T I'm talking to!

I agree with the layoffs... but they should be laying off people in the "product development" department. that's an essential part of the company...

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Again this? They had this planned, the job cuts end at the end of May. Unfortunately it seems that some more will go. It's necessary to do this. What I think Chen should do is offer a BIS like service for BlackBerry 10 users who are interested in getting compression and better security. I'm certain there are many willing to pay for this service with a Secure Cloud Service thrown into the mix.

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Why don't people get behind this idea? There should be a monthly service charge for this option. People would pay. Can someone comment on this suggested BIS for BB10 option?

I agree I would pay for bis.

BlackBerry could be charging for some of its apps like apple does. I would be willing to pay for cloud storage and a BlackBerry email.

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I feel bad for these people but I'm sure that in most part, there was hefty severance pay issued.

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Hefty severance indeed...and with all that free health-care up there... but seriously, the ones who are soon to get cut had plenty of time to prepare for this, I feel more sorry for the ones who got axed in the beginning and my prayers go out to THEM, but these employees should already be shopping their resumes to prospective employers, failing to plan is planning to fail.

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Great write up Chris. Thanks. Do you know if salaries are charged against that estimated 80% gross margin in Software and services or are those lumped in with G&A? I assume the 25% margin guesstimate you use in MFG already factors in salaries. Do you think these job losses and those remaining one (if they are not done yet) were already expensed in previous quarter(s) meaning that this will not impact profits? (I.e. simply cash flow and accrued liabilities?)

Yes, more work being moved from this country to overseas.

I love Blackberry, but I hate seeing jobs moved in such a matter.

It is always great to keep a home base for all functions. But, keep in mind, Apple has forever been far-eastern outsourcing production. And, before IBM sold their PC business to Lenovo, the Lenovo company had already produced IBM PC's in China. Where was IBM PC support retained? US.

These cuts might be a good thing--if BlackBerry were in a timeless bubble instead of highly competitive environment with fast-moving competitors. These cuts are a distraction: they hurt morale, foster uncertainty, and lead to more "brain-drain," which impacts the ability to execute.

While BlackBerry are busy transforming into the company they need to be, competitors are innovating and evolving their products, filling gaps and encroaching on any advantages BlackBerry may still maintain. I think Chen has the right idea, but the question is whether he can pivot BlackBerry in a short enough time so the company still matters. I think the jury is still out here.

While it's easy to be a Monday-morning quarterback, it's looking more and more like an acquisition/sale might be one of the only viable options left. While the capital injection BlackBerry received might be enough to keep the lights on while the company slims down and prepares for a sale, it's probably not enough for a full 180-degree turnaround.

Lets be realistic, the financial hemorrhaging isn't just going to stop abruptly. Restructuring is never a pretty thing to do and it simply takes time. And like you even stated, "the jury is still out.

Of course. My point is that the longer it takes, the greater the opportunity cost. At some point, the competitive landscape might change so much during the restructuring that the original premise behind what the company is restructuring into is no longer valid.

If your ship is sinking, you won't stay afloat by just letting water out of the hull. You have to fill the holes, repair the damage. That can take some investment in capital, talent, etc. It's naive to assume that 100% of what remains of BlackBerry's existing workforce will just fit right into the new BlackBerry and be able to execute perfectly. New or different skill sets might be required.

The problem is not just the job cuts but the impact it is having to the waterloo region.
I believe BlackBerry was the largest employer in the region, especially city of Waterloo and Kitchener, it's in the news cos people don't know if it can affect housing market or to what extent will the small businesses be affected.
BlackBerry is a pride for most Canadians weather they use BlackBerry or not and feel sad to see the state of the company.
The comparison should not be between employees of Facebook vs BlackBerry when making money everything is accepted.

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"...when making money, everything is accepted"?

Putting chemicals in tobacco and cigarettes to make them more addictive? Sweatshop labour? Saving on safety measures and causing a giant oil spill?

Ethical business for the future...

"No Q10?" -> "Buy from Chen... "

Why not create a redeployment programme where people can move to a department that desperate need assistance e.g enterprise customer support. The retraining would be a fraction of the cost.

BlackBerry desperately need sales people to push those devices hard to all the stores that are not stocking them. BlackBerry needs personnel to show how good BB10 really is.

Mr Chen needs to start talking to the US Carriers and get to the truth about BlackBerry 10 devices. If there is any bias against BlackBerry get Mr Zipperstein involved.

BlackBerry wants to cut costs, let's calculate how much money BlackBerry has paid out in redundancies over the past few quarters, between 2010 - 2013. That's good money after bad.

Retraining instead of redundancy.

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Retraining might seem more preferable but it doesn't solve the question of over-staffing. I can't see how or why BBRY needed more staff than Facebook.

What the company needs is an aggressive Marketing Department and good Public Relations. With these two functions it is possible to sell 'air'. NOT meaning to say, BB has no great products, they have LOTS of great products. But, other 'marketing' related companies have had success selling lesser value products and services.

On CB we have seen 'great' new products that come to naught because the company has neglected to build hype.
So, what of the layoffs? BB should not spend time on building stuff that they don't know how to sell. Focus the retained staff on core programs that have reason for success.
Layoffs? So be it.

I think John Chen's next plan of attack is going to be in the Marketing and Advertising area. I can see an aggressive marketing campaign sometime within Sept 2014 to Christmas when they release and show case the rumoured 64-Bit BlackBerry 10 monster phone.
John Chen spoke about a product that will attract people from other platforms, and wishes it be completed and released this year 2014.

Oh yes, please bring it on.

Just hold off till it's ready, we can't afford another flop, whether it's devices, software or marketing.

"No Q10?" -> "Buy from Chen... "

1) LOL. Thems is nve'r on time :(
2014 = 2016

And,no matter how great the new smart phones are, people think that Blackberry is a dead company.
The Blackberry MUST first present the position to the public that the company is alive and kicking.

2) Death for Blackberry has been due to ONLY BlackberryWorld apps being formally available.
Most smart phones 'look alike' in operation.
The ONE thing that sets them apart is stuff the phone maker does not make - APPS which they only resell.
Unless BB brings native "Snap" or an equivalent (to load most Google Store apps) there is NO hope that people will come to buy 'just another' smart phone.

3) The market for premium smart phones is rapidly diminishing, as is evident with lowering Apple share of the market of costly iPhones.
To sell phones the companies must bring $200 phones to the 'emerging' markets and somewhat more costly phones to the developed markets.

Very sad, but I totally agree with Chris that its the necessary evil. Hopefully the upcoming Financial Report would not be totally awful.

The report is on the last quarter of 2013, which was a disaster.
The press will 'destroy' BB company based upon the report ("Blackberry is at it's death bed") without looking at plans by the new President. BB stock will rise on the news because it took a small adjustment dip this week.

This is the world of technology, jobs come and go faster than any other industry. I once worked for the second largest conglomerate in the 90's, Westinghouse, now no longer in existence.


Hopefully housing costs go down in Waterloo as a result of all the layoffs. I'm planning on buying in November lol :/ jk


It's true you can't worry about flooding the basement when the house is on fire, but stabilization and an end to the layoffs and negative reports would be welcome news.

Sent from my BlackBerry Z30

We all knew the headcount at the company was way ahead of the revenue stream. In order to be competitive and stabilize revenue job cuts had to come. You have two choices increase revenue substantially or reduce staff. I dont like the idea of job cuts either. It always smells like the top brass are trying to save themselves and their corporate pension plan. This still may be the case but in this case in order to even have a pension plan they have to keep the company going.. This meant trimming numbers. With the switch to foxconn as well it means fewer people are needed as much of the manufacturing process is now 3rd party. We want to see the company be healthy and start making money but in order for that to happen they have to get the revenue structure to a somewhat reasonable level. I myself have been through a restructuring its painful and its not fun for anyone. I see the issues involved. I just think companies always need to be looking a bit longer long term. What are the repercussions. You think a bad customer gives you a bad name what about 5000 employees that just got layed off. The hope is that something good comes of it. revenues stabilitze perhaps even some rehires at some point. The other thing is many companies come from layoff spin offs so maybe there is a company out there jsut waiting to be invented. So sorry to hear about the layoffs blackberry but this wasnt unexpected and more may come. Just remember was this a continuing downward spiral or just a leveling off for sustainability of the company. One would hope the latter. Lets hope John chen is the kick ass CEO he was portrayed as. I think he has the right idea lets hope the end result is a good one

They over hired and over expanded between 2006-2010 in many departments. These layoffs are inevitable.

BlackBerry Since 2006. Rogers Halifax, NS - Z10 Official 10.2.1

Financial health is not screwing your core customers by charging 800$ for a phone with a faulty keyboard.

Fix Q10 double typing.

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I have a Q10, never noticed that, could it be an isolated problem? Did you pay 800 bucks for yours? I paid 620 with tax last June.

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Let's not forget JC hired his SAP colleagues . These Enteprise focused colleagues will want to hire a new entreprise team and a new global enterprise sales force !

Z30 : posted via CB10 app

I just don't get this company any more. I am from the Waterloo region and worked at RIM when they only sold devices to the enterprise customers. I have asked in my department why don't they expand in to the consumer market? I was told that they "don't need to, it is a prestige device!" I found that kind of odd, but a year after devices appeared in Rogers stores.
I have attended many meetings where the two co-founders held speeches around the time of iPhone release. I felt like Alice In Wonderland. There was a lot of internal talk to change the look of the device but the top level management resisted to change. Keep in mind that when the device announcement is made they are at least 3 more devices in testing stages of the design or OS, evaluation units. I kind of figured that most of the talent was from the local university and they did put a lot of work in to programing and Computer Engineering side of things. Mid-level managers where a joke and upper level management just enjoyed tremendous success while collecting their salaries. They wanted no change, as change could bring possible failure. Marketing department had a smallest budget. Public relations and announcements where no where in the news. There where just two familiar faces doing the interviews and living in a dream with statements of "we have leapfrogged the competition!"

Layoffs are important in terms of trimming the fat and streamlining the company. But the trend of laying off your manufacturing employees is so flawed that it shows strategic weakness of any CEO. Your general labor is cheap and accounts for a majority work force of BlackBerry. Logical approach would be red-tape lifted of R&D so they can do what they do best and getting those devices to market. Only layoffs should have been implemented on upper level management. Lowering their salaries and holding them accountable to their pore decisions.

So layoffs in manufacturing and partnering with Foxconn who delayed LCDs to BlackBerry because Apple payed cash and made a bigger order made sense before but not now.

The strategic positioning with the partnership is just a temporary fix for a future acquisition. Someone will buy it for patents and close the chapter of once great company.

I would like to apologize to all the BlackBerry fans that supported this company for so many years like I have, if my rant offended anyone, my apologies. But the facts are facts.

I have had every BlackBerry device that came out until my current one Z10. I stayed loyal to the brand because it supported Canadian economy and the region. Layoffs of the front line employees never sits well with me because of management's pore decisions.

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Good to hear from someone within. I also believe there will come a time when they sell off. Hopefully not an American company


Job cuts results in lack of human resources which is the most essential matter for the company to rise up with new ideas!!

The main factor that BlackBerry deals with is bankruptcy the main reason is that u people develop mobiles only for the corporate which makes the youth and common people to dislike it!!!

To be frank people in India think BlackBerry is dead and still using the native os and the device is mainly for the business people!!
So they go for the iPhone or some android?!

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That's not good, and they still releasing the Q20, what happens when the company goes under, we gonna have new Q20's and no service or what?

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Just announced the closing of Ottawa Tech Center, where they designed, developed BB-10, and dumping an additional 100 people. This is seporate than the 120 in Waterloo. Not good......

The main R&D is in Waterloo. That's where the brains are and the NOC servers. Even the previous CEO duo had restricted access in that building. That's unfortunate to hear.

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Doesn't sound good but blackberry is in a deep hole and android and apple are getting too big. Advertisement is the key. Cmon all the best of the best have a bb: tim cook, jay-z, drake, Obama. It's obvious it's a good device if they use it. Get the celebrities to advertise it. It sounds desperate but it may just save bb.

All it takes is getting the consumer to buy a blackberry. It's really addicting once you have it.

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"BlackBerry claims these cuts are part of the broader 40% staff reduction announced last September...". It wasn't.

" it’s entirely believable to me that this is truly part of last fall’s plan". Nope.

Why can't these folks cut the salary across the board for what ever the percentage to break even ? That way there is no restructuring charge due to severance pay.

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Good point! But CEO's are like vultures, they come in make changes and leave with bonuses regardless of their decisions. Perfect example is Thor. He signed the agreement to be compensated if he loses his position as CEO. Few months before they made the announcement that the company will look for acquisitions. Someone should look in to that. No one can tell me that a man who sets the direction of the company didn't know in advance that their position was to sell the company. Why didn't he sign this at the beginning of his term as CEO?

What you have suggested is logical and Apple at one time did this as their CEO made salary cuts across the board by leading by example.

Another thing that is a huge money pit of every company is the way the staff overspend their department budgets on unnecessary things. Take for example we are traveling to have an event for small carriers. We pay for facilities and for all the additional things that we could have brought our selves. Ex; projector for a 3 day event is $600, catering, which at some events was lavish to say the least, travel expenses I won't get in to but just imagine the company of 20k head count. Corporate charges for the limos, I would have been fine with a cab, unless I'm in the developing country and understand the reason for this. Preferences on the hotel chains. You should have seen the complaining and power tripping on the selected hotels if they were not up to par for some senior VP's expectations.

I could go on and on about unnecessary costs that every company has and that it's employees abuse. But this is the way that today's corporations are managed.

Oh here is another brilliant idea that they had. They brought in a special consultant to let us reduce costs. What does he do he says our head count is high so next thing you see is lay offs. Now the sad thing is when I have to tell a front line employee who told me that he "just got married and bought the house" that he's employment is terminated, and knowing his salary was 50k meanwhile the special operations gentleman who came up with the plan got payed 400k. It makes no sense to pay someone that high to tell us something we already know is the last resort and are capable of doing our selves.

My favorite example is off-site projectors that we constantly payed for. Irony of this is that RIM had made its own mini BlackBerry presenters which could be hooked up to the projector and you could do the presentations with your BlackBerry. Many others and my self have suggested many times that we buy our own projectors and bring them with us on site. I know we all travel light and try to cram as much as possible in to carry on but as projectors got smaller in size this was a viable option. No one seemed to care. For the price of one projector we would pay the host facility in full over one weekend. Costs can be cut in many different ways without drastically reducing your workforce. That shows real skill and not incompetence of a CEO.

All thes things add up and effect bottom line and I wish the C suite would run this company as if their money was at stake and not shareholders who can always ever so generously take a hit up on a bad strategic decision.

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I'd like to know how much thorsten was paid when he left. I bet he got $30-40 million.

How much do the senior leadership team make (C level)? I bet they all make over $1 M a year.

How many jobs could have been saved if not for pure greed by the pigs at the trough who are directly responsible for the mess BlackBerry is in.


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That's the perspective one takes when they are on the outside looking in. If you were in C level management, would you accept a pay cut and end up with a potentially less competitive salary?

To be honest, instead of saying that redundancy is good and you are numb at your feeling towards these people, I would better say nothing.

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This was part of their plan from last year, the 40% cut down in employees wasn't a surprise, it was the plan from day one when they launched BB10. Media doesn't seem to take notes.

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1. The plan was not to reduce company size by 40% when BB10 was launched. It was supposed to be the new platform that would take us to new heights. That failed so they had to reduce the work force.
2. This particular group wasn't initially intended to be cut, but sold off.

I have friends that work for both BlackBerry (still) and Facebook, and don't think the comparison between them is valid. Facebook is essentially a single social media platform (with an aligned suite of games IM apps, etc.) with which to generate ad revenue. BlackBerry has four divisions over multiple verticals and a disparate set of activities, dealing with hundreds of carriers and tens of thousands of enterprise clients around the world. Still, your point about downsizing is well taken...BlackBerry is finally getting lean. It's pretty close now.

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Presenting as simple downsizing job cut is misleading. there is more than that and the following article is more explicit:
This shows that the strategy is really to exit hw and the announce of later high end BlackBerry designed devices really looks like vaporware. if z3 fails BB10 is dead if not already and its success hardly can be seen with no carrier support (what is left of the carrier relationship?).
Remains MDM and messaging markets. i would value more an article enlightening the company strategy thus not comparing apple to oranges. BlackBerry isn't chasing the Facebook market and shouldn't be compared to it.
You may compare each division in their segment, for example eBBM with lync, cisco jabber,
BBM with skype, snapchat, wechat, whatsapp (not google only 55 to make it!) and the resources in place to show what is the limit in terms of employees.
Chasing the entreprise market is a lot of sales presence that you won't need with end user (but then you will need customer support if billing or advertising structure).
the next logical step might be shutting down BlackBerry world... And making a secure android above qnx.

My goodness Chris ! You are such a toady ! Instead of pressing for improvement to increase sales, you agreed to the layoff with your hypocritical sympsthy! You've given some figures hoping to persuade your readers of "le bien fondé" of your rubbish. What credibility I should give to your so called independence? You are just a mouthpiece of you masters in BlackBerry. So sad ! Just for the purpose of this post, I live in the London UK and work for a bank. Last but not least, is this why BlackBerry is going down? Is it not because people like Chris are surround it?

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If a c-level looked at it from a "company man" perspective, he should have good reason to accept it. Take a look at John Chamber from Cisco with $1 salary per year for many years. If he only worried about his own sake, loosing a small chunk out of 150k range is still better than loosing all. Especially that salary range now a day is not that easy to find.

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Talk about 'Throwing the baby out with the bath water. '

BlackBerry is a cautionary tale of wasted opportunities.

BlackBerry can be turned around but the key things have to stay.

1. Retraining for any further proposed redundancies, hire people who love BlackBerry and know BB10.2 makes demonstrations easy. You will have a ready made sales team. After care is crucial to BlackBerry's survival.

2. Unleash The Astonishing Tribe. People need to see a radical OS to blow the consumers mind. Let TAT see what they can do.

3. Don't play safe with specs and designs. The market has changed everyone is talking about design ( the look and feel of a product) . I have seen enough concepts on Crackberry to know the potential to create some amazing devices with BlackBerry .

I'd rather go out with a bang than a whimper - knowing that you gave your all for BlackBerry.

4. And finally understand your customer base and what you want to achieve. It is not only about Enterprise. Enterprise customers are consumers too. Don't differentiate, provide ' best in class customer service. 'This is where Mr Chen will fail. How many times have you seen people walking around with two devices. BlackBerry MUST NEVER Let this happen.

BlackBerry should have devices that is the 'Daley Thompson ' (decathlete of devices that does the 10 key things superbly.) What is the point of BlackBerry Balance if the devices still give people the feeling having an alternative.

It's not where you want to go, it's about having the right people in place for the journey - Jim Collins : Good to Great

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