BlackBerry cancels device launches, rising inventory costs hurt

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SummaryMounting inventory has cost BlackBerry about $1.6 billion in the third quarter

Mounting inventory has cost BlackBerry about $1.6 billion in the third quarter and forced the Canadian handset maker to cancel the launch of two new devices.

BlackBerry said the pile-up was mainly on account of unsold BlackBerry 10 devices, which was launched earlier this year with much fanfare.

During the third quarter, the company registered hardware sales of 1.9 million BlackBerry smartphones compared to about 3.7 million BlackBerry smartphones in the previous quarter.

Most of the units recognised were BlackBerry 7 devices. “During the third quarter of fiscal 2014, the company recorded a primarily non-cash, pre-tax charge against inventory and supply commitments of approximately $1.6 billion, or $1.3 billion after tax, which is primarily attributable to BlackBerry 10 devices,” the company said in a filing.

During the second quarter of fiscal 2014, BlackBerry recorded the Z10 inventory charge of about $934 million, which included a write-down of inventory of approximately $627 million and supply commitments of approximately $307 million.

BlackBerry said it had shipped devices to its carrier and distributor partners to support new and continuing product launches and meet expected levels of end customer demand in the third quarter. “However, the sell-through levels for BlackBerry 10 smartphones decreased during the second quarter of fiscal 2014 due to the maturing smartphone market and very intense competition,” it said.

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