Blackberry signs 5-year deal with Foxconn

Blackberry signs 5-year deal with Foxconn

BlackBerry Ltd on Friday announced a five-year partnership with Taiwan-based Foxconn Technology Co Ltd to build low-end devices for sale emerging markets.

The deal is unconventional in the sense that BlackBerry will not pay upfront for components used in the phones made on its behalf by Foxconn. Instead, the Taiwanese electronics maker will take a share of profit that will be generated by the sale of each device in return for assuming responsibility for inventory management.

However, the aforementioned arrangement can lead to writedowns in case devices go unsold. Foxconn will also play a role in developing, designing as well as distributing the devices.

Commenting on the deal, Jefferies analyst Peter Misek said, "It's almost like BlackBerry is disposing of its consumer handset business without actually disposing of it."

However, BlackBerry's new CEO, John Chen, expressed hope that the deal would help the Canadian manufacturer's handset business to turn cash-flow positive.

The Waterloo, Canada-based handset maker also reported a huge net loss of $4.4 billion for the third quarter, compared with a net income of $9 million in the corresponding period of last year. The loss of mainly driven by the combination of inventory writedowns and impairment charges. Excluding the inventory writedowns and impairment charges, the loss stood at $354 million.

Nevertheless, BlackBerry shares gained as much as 17 per cent after the manufacturer announced its five-year deal with Foxconn. Most recently, the stock was trading at $7.13 a share, up 14 per cent, on NASDAQ.

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