BlackBerry’s Latest Filing Paints Grimmest Picture Yet of Company’s Business

How bad are things at BlackBerry?

The company’s latest regulatory filing — made Tuesday evening — offers several indications of the depth of the issues facing the smartphone maker. The company released its quarterly numbers last week, but saved some of the grim details and analysis for its formal filing with the Securities and Exchange Commission.

For example, BlackBerry notes in the filing that it can’t really forecast how much it will have to discount the BlackBerry 10 phones in the hands of carriers in order to get the smartphones sold. That explains why its second-quarter results basically stopped recording revenue for BB10 sales. Instead, BlackBerry said, it will count sales down the road once they are made to end customers.

And speaking of customers, it appears that darn few opted for a BlackBerry in the second quarter, even before the extent of the Canadian phone maker’s issues became clear. The company estimates that BlackBerry unit sales to customers (as opposed to the number of devices shipped to carriers) were approximately 5.9 million. That’s down from 6.4 million smartphones bought by customers in the first quarter, and 9.5 million devices in the year-ago quarter.

And of the 5.9 million BlackBerrys sold last quarter, 4.2 million were running the old BlackBerry 7 operating system, leaving few of the new models anywhere other than shelves and warehouses.

With inventory piling up, BlackBerry took a $934 million charge related to Z10 inventory. However, BlackBerry cautioned in the filing that the extent of the inventory woes are hard to estimate, especially with the company having announced plans to slash its workforce and a tentative deal to sell itself to Fairfax Financial Holdings, one of its large investors.

“Significant judgement was required in calculating the inventory charge, which involved forecasting future demand and the associated pricing at which the Company can realize the carrying value of its inventory,” BlackBerry said, saying there was the potential for additional inventory charges ahead.

BlackBerry is also losing ground in the markets where it had been doing best — emerging markets where alternative smartphones had been out of reach, price-wise. As many had predicted, low-end Android is taking a big bite.

“The intense competition impacting the Company’s financial and operational results that previously affected demand in the United States market is now being experienced globally, including in international markets where the company has historically experienced rapid growth,” BlackBerry said in the filing.

BlackBerry blames increased competition and the arrival of low-cost Android devices, saying it has been hurt by a lack of apps. “The decline can also be attributed to consumer preferences for devices with access to the broadest number of applications, such as those available in the iOS and Android environments,” BlackBerry said.

And as for that sale of the company, as has been noted elsewhere, the deal is nonbinding and contingent on Fairfax finding financing. The actual price it offers could be considerably less, analysts and investors said. BlackBerry did say that it expects Fairfax to complete its due diligence by Nov. 4.

The full filing can be found on the SEC’s website, which, unfortunately for BlackBerry, is still up, despite the government shutdown.