As BlackBerry Moves to Outsource Manufacturing of Its Phones, More Write-Downs on Inventory Likely

By:
Dominic G. Diongson
Published Date:
Sep 29, 2016

BlackBerry_Torch_QWERTZ_Keyboard
BlackBerry no more. At least in the physical sense. The once-dominating force in the smartphone market is giving up making handsets on its own after the proliferation of iPhone and Android-enable devices.

CPAs and business professionals turned to their BlackBerry as the must-have mobile device in the 1990s and early 2000s. But with the introduction of the iPhone in 2007, BlackBerry — with its keyboard and small screen — became passé. Recently the company turned to using the Android operating system to power some of its devices, a reflection of losing to the competition in the smartphone market.

The phase-out of its handset manufacturing and outsourcing production to other phone makers mean that BlackBerry will focus on software. That also means it will likely write down its inventory of handsets. In its latest reporting period, the fiscal second quarter ended August 31, 2016, the company recorded inventory write-down charges of $96 million, which it said were included in its cost of sales. That’s more than double its first-quarter inventory write-down of  $41 million. 

Taking out those remaining handsets off its books could help boost its profit. BlackBerry has already signed on a company to make and distribute its handsets, in Indonesia—which remains its largest market.

    

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