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BlackBerry Smartphone Business Up Against Steep Competition

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BlackBerry to cut costs in smartphone segment

BlackBerry’s (BBRY) smartphone business continues to decline. As the chart below shows, BlackBerry’s revenues from its Hardware segment fell from $379 million in fiscal 1Q15 to $263 million in fiscal 1Q16, a year-over-year decline of 31%. To compensate, BlackBerry has started to reduce its expenses in this segment. During its 1Q16 earnings call, management said it’s looking to cut $100 million to $200 million from its smartphone segment over the next one year.

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A few weeks ago, BlackBerry announced it would be laying off an undisclosed number of employees from its smartphone business, according to a report from the Wall Street Journal. This announcement came a month after the firm announced that it plans to close down its offices in Sweden (EFA), laying off up to 100 employees.

BlackBerry making slow progress with smartphone business

BlackBerry did make some progress in the last quarter when it renewed its agreement with T-Mobile (TMUS) to sell its Classic smartphone. BlackBerry has also strengthened its relationship with carriers such as Verizon (VZ) and AT&T (T). AT&T launched the BlackBerry Passport and the Classic smartphone, and Verizon has started selling the Classic.

During the last quarter, BlackBerry partnered with Taiwanese smartphone manufacturers Compal Electronics and Wistron. These partnerships are in addition to an existing partnership BlackBerry has with Foxconn Technology to manufacture its devices. Yet, all these efforts hardly moved the needle for BlackBerry.

For diversified exposure to Verizon, you can invest in the Technology Select Sector SPDR Fund (XLK). XLK invests 4.9% of its holdings in Verizon.

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