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.