Analyst Thinks Cost Is Why BlackBerry Cant Shut Down Its Ailing Hardware Division

There’s no sugar coating the fact that BlackBerry’s hardware division hasn’t been able to produce a truly spectacular device this year that would have caught the market’s attention, and even brought in substantial revenues for the company. It all started with the first BB10 device, the Z10. A few months after its release, the company released the Q10 and a few months after that, the Q5 and closed off the year with its Z30 phablet. All of these devices are powered by its new BlackBerry 10 platform announced in January. However, in the previous quarter, BlackBerry had to take a $1 billion hit due to unsold inventory, which goes to show that its devices didn’t perform well. The constant losses has many people wondering why the company doesn’t just stop making devices and simply focus on its enterprise technologies? Citigroup analyst Ehud Gelblum thinks that the cost involved with shutting down its hardware division would end up sucking its cash balance dry.

According to the analyst, if BlackBerry decides to shut down the hardware division, it would need roughly $450-$500 million in separation costs to send the division’s staff packing. The company will also need to pay separation costs related to hardware which might run up to $1.5 billion. Capex commitments related to its Network Operation Centers are likely to cost an additional $1 billion. Operating leases and other purchases commitments would need nearly $600 million. Add these figures up and they exceed what cash balance BlackBerry has left, despite having received a $1 billion capital injection from a group of institutional investors.

What this basically means that BlackBerry can’t afford to shut down its hardware business, so it might as well try to keep it running until there comes a point when there’s simply no more cash in hand to continue operations. Then, as many analysts have predicted, the company might be broken up and sold off in parts.

This article was filed in Homepage > Cellphones and was tagged with BlackBerry.
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