BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) projected that it would incur $400 million pre-tax charges related to its restructuring efforts under its CORE program for the entire fiscal 2014 until the first quarter of its fiscal 2015, according to its latest regulatory filing with the Securities and Exchanges Commission (SEC).
According to the Canadian smartphone manufacturer, its previous estimated restructuring cost was $100 million for fiscal 2014, which means the costs increased by four times. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) explained that the increase was partly due to its recent decision to eliminate 4,500 employees, or 40 percent of its global workforce. The total number of its employees will be 7,000 globally after its workforce reduction.
BlackBerry recorded inventory charge
Based on its financial documents, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) also recorded an inventory charge of $934 million, or $1.27 per diluted share in the second quarter of fiscal 2014. The inventory charge was primarily associated with the BlackBerry Z10 smartphone.
The Canadian smartphone manufacturer calculated its inventory charge by considering significant factors, such as projections on future demands, and associated pricing to be able to determine the carrying value of its inventory.
BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) emphasized that its expectation with respect to its inventory and asset risk and other potential charges related to inventory are subject to an inherent risk of forecasting its financial results and performance, especially over the long-term due to the rapid technological changes, evolving industry standards, strong competition and a short product cycle.
BlackBerry suffered losses
The company suffered $965 million losses including the $934 million BlackBerry Z10 inventory charge and $72 million restructuring costs in the second quarter. In its regulatory filing, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) wrote, “Other charges and cash costs may occur as programs are implemented or changes completed.”
The company also pointed out that projecting its financial results is difficult because of uncertainties related to the changes in its strategy, and given the fact that it is currently pursuing potential strategic alternatives.
BlackBerry signed a letter of intent
Last month, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) signed a letter of intent (LOI) agreement with a consortium of buyers led by Fairfax Financial Holdings Ltd (TSE:FFH) to acquire and take the company private for $4.7 billion or $9 per share subject to due diligence. Both parties expect to complete the due diligence and to negotiate and execute a definitive agreement by November 4, 2013.
Fairfax Financial Holdings Ltd (TSE:FFH) is managed by Prem Watsa, and is the largest shareholder of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) with a 10 percent stake.