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BlackBerry enlists Foxconn as Q3 loss hits $4.4B

Massive charges knock a staggering BlackBerry into an even deeper hole. Will a manufacturing deal with Foxconn be much of a lifeline?

BlackBerry sold just 1.9 million smartphones last quarter, down from 3.7 million a year ago.
BlackBerry sold just 1.9 million smartphones last quarter, down from 3.7 million in the previous quarter.
Josh Miller/CNET

It may not have seemed possible, but the news keeps getting worse for BlackBerry.

The staggering mobile phone maker announced Friday a third-quarter loss of $4.4 billion, a stunning freefall from the loss of $965 million suffered in the second quarter of this year. Revenue also tumbled, nestling in at $1.2 billion, down from $1.6 billion in the prior quarter.

BlackBerry managed to sell only 1.9 million smartphones last quarter, an ugly decline from the 3.7 million sold in the previous quarter. And talk about a vote of no confidence by customers: the company said that "most of the units" that generated revenue in the quarter just ended were older BlackBerry 7 designs, not the newer BlackBerry 10 devices that had been front and center in its revival efforts.

The results showed an even more devastating downturn compared with last year's third quarter when BlackBerry took in a profit of $14 million on revenue of $2.72 billion and shipments of 6.9 million smartphones.

On a brighter note, BlackBerry said that more than 40 million users have registered the BBM apps for iOS and Android over the past 60 days. More than a dozen different Android vendors also plan to preload BBM on their devices.

As smartphone sales dwindle, BlackBerry is also relying more on its enterprise products. The company said that more than 30,000 BlackBerry Enterprise Service 10 servers have been installed to date, up from 25,000 in September.

"With the operational and organizational changes we have announced, BlackBerry has established a clear roadmap that will allow it to target a return to improved financial performance in the coming year," BlackBerry Chairman and CEO John Chen said in a statement. "While our Enterprise Services, Messaging and QNX Embedded businesses are already well-positioned to compete in their markets, the most immediate challenge for the Company is how to transition the Devices operations to a more profitable business model."

Seeking help from Foxconn
BlackBerry may have already found some help on that front. Along with Friday's earnings news, it announced a new five-year agreement with Foxconn to jointly develop and manufacture consumer smartphones initially targeted for Indonesia and other emerging markets in early 2014.

"This partnership demonstrates BlackBerry's commitment to the device market for the long-term and our determination to remain the innovation leader in secure end-to-end mobile solutions," Chen said. "Partnering with Foxconn allows BlackBerry to focus on what we do best -- iconic design, world-class security, software development and enterprise mobility management -- while simultaneously addressing fast-growing markets leveraging Foxconn's scale and efficiency that will allow us to compete more effectively."

BlackBerry said it will continue to own all of its intellectual property.

The bulk of BlackBerry's $4.4 billion net loss consisted of two massive pieces: a $2.7 billion charge connected to "long-lived assets" and a $1.6 billion charge connected to inventory and supply commitments. After adjustments, the loss from continuing operations for the third quarter was $354 million.