BlackBerry has announced plans to increase its annual profit by an additional $100 million as it implements cost reduction strategies, including workforce reductions, within its cybersecurity business division.
This move comes following a previous announcement of a $50 million annualized cost reduction plan and the elimination of 200 jobs in the prior quarter.
Cost Reduction Initiatives: BlackBerry aims to achieve annualized savings of approximately $27 million through additional layoffs within its cybersecurity business. Non-headcount actions are expected to contribute an incremental $8 million in savings. The company is streamlining its cost structure across all functions, with a particular focus on reducing costs of goods sold and research and development expenses.
Additionally, BlackBerry is taking actions within its general and administrative functions to realize annualized savings of approximately $20 million. This includes the closure of six of its 36 global office locations, resulting in expected annualized savings of approximately $7 million, along with other reductions in force to save approximately $13 million annually. Costs associated with these actions are estimated to be around $12 million for the current quarter.
Expected Positive Cash Flow: Despite experiencing operating cash usage of $56 million in Q2 and $31 million in Q3 of the current fiscal year, BlackBerry anticipates a further sequential reduction in operating cash usage for the current, fourth quarter. With the cost-reduction measures in place and anticipated operational efficiencies in fiscal year 2025, BlackBerry expects to maintain a positive net cash position throughout the coming fiscal year and aims to achieve positive operating cash flow by Q4 FY25.
Progress in Business Division Separation: BlackBerry has made significant progress towards establishing its Internet of Things (IoT) and cybersecurity business units as fully standalone divisions. It has established a Project Management Office and enlisted leading management consultants, Alvarez & Marsal, to assist with the process. Divisional Chief Financial Officers, Chief People Officers, and General Counsel for both the IoT and cybersecurity businesses have been appointed, with divisional back-office teams in the process of being established.
Solid Balance Sheet: Having secured long-term financing through the issuance of convertible senior notes, BlackBerry plans to use the net proceeds primarily to repay $150 million of short-term debentures due on February 15, 2024. This move will reduce its debt by 45 percent compared to November 2023. With the expected return to positive operating cash flow, BlackBerry anticipates being well-positioned with a solid balance sheet.
CEO’s Statement: John J. Giamatteo, Chief Executive Officer of BlackBerry, expressed gratitude to the company’s team for the progress made toward separating core businesses and achieving profitability and positive cash flow. He acknowledged the challenges posed by the decisions made and emphasized the company’s focus on maximizing returns, delighting customers, and executing its strategy with urgency. Giamatteo also highlighted the company’s solid balance sheet following the refinancing, indicating BlackBerry’s confidence in executing its strategic goals.
