Why BlackBerry is laying off 40% of its workforce?

Is BlackBerry going the Palm (the once iconic maker of PDA, webOS, touch screen and smartphone pioneer) way? In some ways yes - for instance in 2010 HP acquired Palm Inc for $1.2bn and in less than year killed it, as its own touch screen webOS based tablets failed to garner any interest. While everyone was thinking that Palm would end up as a footnote in one of HP's annual reports, but came the big surprise when LG acquired webOS last February for an undisclosed amount.

Cut to BlackBerry, it might not to be as lucky as webOS or HP. As going by the way the company is disintegrating by the day it looks like it will be sold in parts- patents, services et al. But even then, despite the company's aggressive pitch to get acquired by end of this year is indeed an uphill task.

Getting leaner and meaner?

Its indeed ironical that in less than 24 hours of announcing its large screen  z30 phone- comes with a big 5 inch display- a report from WSJ said that BB is cutting down 40% of its 12, 800 strong work force( as of March 2013). It's a whopping 5,120 employees. What's more troubling was the fact that BlackBerry in the last one year has launched 4 of its BB 10 device- z10 followed by Q10 and then Q5 and now z30. And the fisrt three had failed to revive the company - and z30 might not either. 

This layoff is massive and though said to impact majorly its North American workforce, but has its ramification all across the world. Brian Blair of Wedge Partners speaking to Bloomberg TV said, "The proposed lay-off is a smart move by the company and it will only improve its sale process. Anybody buying BB in part or whole might not want to take the full load of employees."

Analysts also say that since buyers are looking at buying parts of BB and that further complicates the whole buyout process as its value need to be seen in device agnostic perspective. Moreover even bought in parts it's still myopic on how buyers will take those individual components once they acquire it. Clearly it's got assets like its 70 mn subscribers- but that might sound clichéd by now- it's got patents and services. But it all makes sense only when seen as an eco-system that converges on its devices. This eventuality calls for lots of post acquisition synergies and its unlikely any company which is looking at quick turnaround times will take a plunge. So buying in full makes sense in some ways - but BB 10 is a dying platform- and so seeding in further - say BB 11 yet again would be a long haul process.

So who will take that risk given the current smartphone market dynamics?

The writing is clear on the wall. BB is done in North American markets -its life line is in India. China and other emerging markets- but markets like India are highly price sensitive and BB got its pricing totally wrong for its z10 and moreover markets like India are ruled by long decision making cycles for new IT purchase and product refresh is not as frequent as in the West. So it's a service centric market. This might be a dampener of BB in pushing more volumes and acquiring new mandates.

If you consider enterprise purchases can jump start - wait a minute- there is a problem here too. Most of the large to mid market enterprises in North America and other geographies as per various reports suggest that most of them had put a freeze on new BB purchases in the last 3 months. These are usually large purchases done for the whole enterprise. They are putting a hold because they are not sure how the BB as a company is going to evolve as it has publicly announced it's up for sale.

BB's top executives are trying to sell the company ASAP. There is a great element of urgency and this massive lay off also signals clearing up all liabilities apart from its core assets like patents and services. At the end of the day if we reflect on this development, it only reminds what Intel founder Andy Grove said, "Businesses fail either because they leave their customers or because their customer leave them"

BB is a classic example of this.