BlackBerry’s smartphone supplier is moving ahead with plans to end its partnership agreement, raising new questions about whether the Canadian company will soon exit the handset business.
The chief executive of Jabil Circuit Inc. told analysts in a conference call that Jabil is reconsidering how much BlackBerry will contribute to its financial results next year.
“We are in discussions right now on how we are going to wind down the relationship,” CEO Mark Mondello said late Wednesday, breaking with Jabil’s usual practice of declining comment on specific customers.
Jabil is factoring in a combination of income loss and the financial hit that would be felt on the company’s infrastructure, Mondello said.
The manufacturer, which has its head office in St. Petersburg, Fla., said the estimated time for any decision to be made is still uncertain, but that it was likely to happen “in the coming months.”
The comments add to growing anticipation that BlackBerry could stop making physical devices after its latest devices failed to catch fire with consumers.
Earlier this week, the Waterloo, Ont.-based smartphone maker became the centre of a highly conditional takeover offer from Fairfax Financial, one of the company’s largest shareholders.
Investors have appeared less than impressed with the uncertainty surrounding the potential deal. Shares of the company extended their decline for another session, falling 11 cents to C$8.15 on the Toronto Stock Exchange – well below the Fairfax offer price of $9 (U.S.) per share.
Watsa did not return calls for comment on the continuing erosion of BlackBerry’s stock price. Since the conditional bid was put forward by Fairfax on Monday afternoon, BlackBerry stock has dropped more than 12 per cent.
The handset business has been under the microscope of analysts for several quarters, with several suggesting that the company shut it down to reduce its losses to focuses on profitable parts of its business tied to security software.
BlackBerry did not immediately respond to how many manufacturers handle its handset business, but Jefferies analyst Peter Misek said he believes that Jabil is focused on production of the BlackBerry Q10, the keyboard device that has been one of the more popular phones.
“While a Q10 inventory writedown is possible, we think BlackBerry may just stop most of the production and use its existing stockpile and channel inventory to fulfil demand from any enterprise who are upgrading,” Misek wrote in a note.
U.S. carrier T-Mobile has disclosed that it will no longer stock BlackBerrys in its retail stores, though customers will still be able to order the phones and have them shipped to them.
Canadian carrier Telus declined to say whether it was making any changes to how it would stock or promote BlackBerry devices. Both Bell and Rogers didn’t respond to requests for comment.
Last week, BlackBerry disclosed that it would stop promoting its phones as consumer devices, heeding the growing dominance of Apple’s iPhone and devices on the Android operating system.
Even large business consumers have been reluctant to sign new contracts with BlackBerry in recent months. Reports have pegged financial services giant Morgan Stanley as one BlackBerry customer that has held back from signing a new contract.
The BlackBerry smartphone remains popular with corporate and government workers, though earlier this year the company launched a product that migrates its popular security features to other devices.
A product called Secure Work Space allows Apple and Android users to separate their data and work apps, such as email and calendars, from their personal apps allowing for a security standard once only available on BlackBerry phones.
While the operations of BlackBerry remain uncertain, investors haven’t warmed to the Fairfax offer of $9-per-share for the company, which values it at about $4.7-billion. The highly conditional offer has been met with skepticism that it will succeed.
Late Wednesday, Fairfax chief executive Prem Watsa tried to calm those concerns saying that he has every intention of completing the acquisition of the smartphone maker in an interview with The Associated Press.
“We’ve got a track record of 28 years of completing what we’ve done. We’ve never re-negotiated,” Watsa said.
The offer for BlackBerry is subject to six weeks of due diligence for both Fairfax and any other partners that join the transaction.
BlackBerry is scheduled to report its second-quarter financial results on Friday, though it has already indicated it expects to book substantial losses on a writedown related to poor sales of its new smartphones.
Last week, the company said will likely post a loss of $950-million to $995-million for the fiscal second-quarter. It also projected US$1.6-billion in sales, far short of analyst expectations of about $3-billion.
A plan to cut about 40 per cent of its global work force, about 4,500 jobs, is also under way.
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