BlackBerry has been bleeding red for years. It turns out that might be the very thing that saves the company.
After its $4.7 billion buyout deal collapsed, the company suddenly reversed gears, announcing that it would forge ahead on its own. Well, not exactly on its own. The company is counting on a $1 billion infusion of cash from an investment group led by Canadian financier Prem Watsa.
The infusion of cash may not solve all of BlackBerry’s problems. The company has reported losses in five of the past seven quarters. Last fiscal year alone, those losses totaled $646 million. Most of the losses can be attributed to the decision to release the touchscreen-only Z10 phone as the first device on the BlackBerry 10 operating system, as competition with Apple’s iPhone. The move alienated BlackBerry’s core customer who was used to – and preferred – the QWERTY keyboard. The Z10 hardly flew off the shelves as the company experienced sluggish sales (sluggish being another word for non-existent).
Blackberry scrambled to fix their mistake. And by scrambled, I mean they waited ten months to replace the touchscreen with the keyboarded Q10. It was too little too late.
The result? A $1 billion write-down on unsold inventory of the Z10. That put losses for the last quarter at $965 million.
But losses aren’t always a bad thing. Those losses may offer the company a silver lining. Like the U.S., Canada offers companies the ability to carry losses forward and backward. That means that losses in one year can offset profits in a prior year (or if none, carried forward to future years) to reduce tax bills. Since those tax bills have already been paid, that means potential refunds. How much of a potential refund? Maybe as much as $1 billion.
And as the company is struggling to turn around, they want their money sooner rather than later and have reportedly asked the Canadian government to speed things up. Apparently, the Canada Revenue Agency is a bit more amenable to those kinds of discussions than our Internal Revenue Service: the company has signaled that a $500 million refund expected in 2015 may be in its hands by the end of 2013.
The extra cash will certainly come in handy as new interim Chief Executive Officer John Chen figures out his next move. And it will have to be a big one: Blackberry has lost 95% of its value since mid-2008.
