BlackBerry steps back on handset business

A salesman arranges a BlackBerry mobile phone inside a display box at a showroom in the western Indian city of Ahmedabad October 13, 2011.

BlackBerry Ltd said on Friday it was entering a handset production deal that lowers the risk it will have to take more massive writedowns on unsold smartphones, and its shares surged even though it posted dismal quarterly results.

The stock rose as much as 17 percent after the company announced the five-year partnership with FIH Mobile Ltd. The Hong Kong-listed unit of Taiwan's Foxconn will initially build low-end devices for sale in Indonesia and other emerging markets. BlackBerry said it hoped to expand the fledgling relationship to its top-of-the-line smartphones.

The deal is unconventional in that BlackBerry will no longer pay upfront for components used in the devices made on its behalf in Foxconn's Indonesian and Mexican factories.

Instead, Foxconn, the trading name of Hon Hai Precision Industry, will take a share of profit on each device in return for taking on inventory management, which can result in writedowns if smartphones go unsold. Foxconn will also help with developing, designing and distributing the handsets.

Chief Executive John Chen, who took the helm at BlackBerry last month, said he expected the Foxconn deal to help BlackBerry's handset business turn cash-flow positive, and for the company as a whole to post a profit for the fiscal year that begins in early 2015.

"It's almost like BlackBerry is disposing of its consumer handset business without actually disposing of it," said Jefferies analyst Peter Misek, who likened the deal to what Hewlett-Packard Co and Dell have done with laptops.

The move, which comes a month after BlackBerry said it was giving up on a plan to sell itself, helped take the sting out of the massive, $4.4 billion loss that it posted for the quarter ended November 30, as smartphone sales shrivelled.

A new line of devices running on BlackBerry 10 software has failed to gain traction, forcing the company to write off $1.6 billion of inventory and supply commitments for the quarter. The previous quarter it wrote off $934 million for unsold phones.

The Waterloo, Ontario-based company pioneered the concept of on-the-go email, and for years its pagers and phones were must-have devices for political and business leaders. But in recent years it has lost its once-dominant market share to Apple Inc's iPhone and a slew of smartphones powered by Google Inc's Android operating system.

As of Thursday's close, the stock had fallen 47 percent this year. It was last trading up 14 percent on Nasdaq at $7.13.

"The most immediate challenge for the company is how to transition the devices operations to a more profitable business model," said Chen, who is credited with turning around Sybase, a database and mobile software company, before it was sold to German software company SAP AG in 2010.

Chen has said he is counting on strong growth in BlackBerry's service business, which manages smartphone traffic on the internal networks of corporate and government clients.

"Just jettisoning all the stuff and driving on with the part of the business that makes money makes a heck of a lot of sense to me and that is very clearly where Chen is going," said Ross Healy, a portfolio manager at Macnicol & Associates who owns a small number of BlackBerry shares.

Carolina Milanesi, an analyst at Kantar Comtech, said the deal is a good move for Foxconn, the world's largest electronic parts manufacturer and a major partner of Apple Inc.

"This might be the first step for them to try and diversify, and experiment with putting their brand on the products they make," she said.

Devices are a challenge

In his first presentation to analysts after the release of BlackBerry's results, Chen struck an upbeat tone tempered with a heavy dose of realism. The mix may have helped soothe nervous investors who had sharply lowered their expectations for BlackBerry after a string of disappointing news.

"It's clear that he's not the old guard, he's not there trying to do what Lazaridis and Thorsten were up to. He's actually been taking some concrete steps," said Mark McKechnie, an analyst at Evercore Partners, referring to BlackBerry's founder Mike Lazaridis and Thorsten Heins, Chen's predecessor.

Chen moved quickly to stamp his authority on BlackBerry, hiring several former colleagues from his time at Sybase and SAP for senior roles in corporate strategy, marketing, and enterprise strategy, a key unit in the stripped-back company.

BlackBerry sold about 4.3 million handsets in the third quarter, with older BlackBerry 7 models accounting for about 3.2 million of that number.

The company recognised hardware revenue on 1.9 million devices, down from 3.7 million in the previous quarter.

On a brighter note, its cash pile grew to $3.2 billion from $2.6 billion a quarter earlier, but that included $1 billion raised by issuing convertible notes to a group of investors last month after calling off a months-long search for a buyer.

Service revenue slipped 13 percent as fewer people paid to use BlackBerry's secure network, and the company said that level of decline could be expected to continue.

Along with the writedown on unsold phones, the company also slashed by $2.7 billion the carrying value of some long-lived assets, mostly licensing deals made when it was far larger.

Quarterly results

The company reported a third-quarter net loss of $4.4 billion, or $8.37 a share, compared with year-earlier net income of $9 million, or 2 cents a share.

Excluding the inventory writedowns and impairment charges, the loss was $354 million, or 67 cents a share.

Analysts on average had expected a loss of 44 cents a share, according to Thomson Reuters I/B/E/S.

Revenue fell to $1.19 billion from $2.73 billion as increased uncertainty about the company's fate led to further sales erosion. Wall Street had forecast $1.6 billion.

Morningstar analyst Brian Colello said BlackBerry's turnaround strategy was more important than its latest operating results.

"I don't think it's a surprise that the revenue, operating margin and the business continues to decline. I think the bigger question is, what is the turnaround story at this point?" he said. "They have a lot of different assets that could point the company in different directions."

Obama calls on Congress to do more on Guantanamo Bay

President Barack Obama on Thursday gave credit to Congress for relaxing restrictions on transferring detainees from the US prison at Guantanamo Bay, Cuba, to the custody of foreign governments but said lawmakers need to go further.

After signing the National Defense Authorization Act for fiscal 2014, Obama noted that Congress retained regulations that prevent the transfer of prisoners to American soil, where they could be tried in federal court.

"The executive branch must have the authority to determine when and where to prosecute Guantanamo detainees," Obama said in a signing statement released during his Hawaiian vacation.

Prosecuting alleged terrorists in US federal court is "a legitimate, effective, and powerful tool in our efforts to protect the nation," Obama said.

The United States also needs "flexibility, among other things, to act swiftly in conducting negotiations with foreign countries regarding the circumstances of detainee transfers," Obama said.

The regulations could remain an obstacle to the administration's years-long bid to close the Guantanamo Bay prison, where 158 detainees from various countries remain after years of detention without trial at the US Naval Base in Cuba. The prison has been condemned internationally.

While lawmakers of both political parties refused to yield on the ban against bringing prisoners to the United States, they were willing to relax rules for sending prisoners to their home countries.

Among the earlier restrictions was that the administration had to certify that the country where an inmate was being sent was not "facing a threat that is likely to substantially affect its ability to exercise control over the individual." This had all but ruled out politically chaotic Yemen, which is home to the largest group of Guantanamo detainees.

Transfers had also been banned to countries that Washington designated "state sponsors of terrorism," which made it difficult to move Syrian inmates. And prisoners in the past also could not be sent back to any country where previously released Guantanamo detainees had returned to "terrorist activity."

Such rules will be lifted or significantly relaxed under the new law.

Even before the legislation was enacted, the administration had become more active in making transfers, sending two detainees each to Sudan, Saudi Arabia and Algeria.

A Minute With: Ralph Fiennes on Dickens, Shakespeare and Bond

From Shakespeare to "Harry Potter" to the new head of MI6 in the "James Bond" film franchise, Ralph Fiennes has mined the complexity of his characters.

The 51-year-old British actor most recently turned his talents to unearthing the details of British author Charles Dickens' extramarital affair.

Fiennes stars and takes his second turn as director on "The Invisible Woman," out in limited release in U.S. theatres on Christmas Day, chronicling the hushed liaison between 19th century author Dickens and actress Nelly Ternan.

Lounging in the courtyard at Hollywood's famed Chateau Marmont hotel, Fiennes spoke to Reuters about deconstructing Dickens, playing heroes and villains and the next "Bond" film.

Q: What inspired you to want to bring this story of Dickens' life and affair with Nelly Ternan to the screen?
A: Audiences have a vague sense of a jolly man writing slightly sentimental, big sagas which are good entertainment and good stories, but they see the darkness of Dickens in this film. The domestic, arguably we'd say, cruelty of Dickens. Dickens is a man of massive contrast and contradictions, and I like that it might stir it up a bit, people might talk about it.

Q: How do you think Dickens' relationship with Nelly impacted his portrayal of women in his novels?
A: Estella in "Great Expectations" is not a portrait of Nelly, but is Nelly filtered through Dickens' anxiety about wanting and trying to reach her. I think Nelly probably resisted Dickens for a bit, and that resistance plays out in, quote unquote, "Estella's cold heart." ... Nelly was quite tough, she was quite a strong-willed young girl, and I think (his literary heroines) all have bits of her in them.

Q. You've depicted literary characters before, but in playing a renowned author such as Charles Dickens, were you nervous?
A: You're always nervous, you just want any part to be truthful and alive and you just want to honour what you think its truth is ... All the scenes paint a portrait of the Dickens that I felt I got to know reading - a vital family man, centre of the party, centre of attention, quite a controlling father, authoritative, capable of great kindness and charitable events. He can be a very genial host, charming, very funny, attentive, and he can be ruthless and tough and bossy and really cruel, he has a potential for cruelty there.

Q: You've played both heroes and villains, from Shakespeare's Romeo on stage to J.K. Rowling's deadly Lord Voldemort in "Harry Potter." Which do you enjoy better?
A: I don't want to play any more villains, I don't enjoy playing them, I've done it. I enjoy playing complicated people. We talk about good guys and bad guys, but it's reductive. I think I wanted to be an actor because of Shakespeare, and Shakespeare's characters are full of ambivalence and ambiguity. They start out as one thing and end up another, so if there's an interesting journey for a character and the audience have to work hard to follow the path of a character, I like that.

Q: You're well known for your portrayals of Shakespearean leads on stage, but how has Shakespeare evolved for audiences now?
A: My sense is that it's going to be harder and harder for younger people to feel excited by the brilliant, athletic complexity of Shakespeare's language, which for so many centuries has excited people by its beauty and its accuracy and its inventiveness of English, which is so extraordinary.
But we learn in times where English is so reduced by the ... awful communications of Twitter and Facebook that people are dumbing themselves down. The delight of expressing yourself in language or listening to someone, that's being diluted.

Q: You're going to be in the next instalment of the James Bond franchise as the new head of MI6. Can you tell us any more about the new 'M' or the film?
A: I can't, I know nothing, I've not been told anything, I have no information, no dates, no sense of the journey of my character at all! I don't!

Pope Francis pays a Christmas visit to Pope Emeritus Benedict

Pope Francis made a Christmas visit to Pope Emeritus Benedict on Monday and said he found his 86-year-old predecessor looking well, according to television footage released by the Vatican.

Francis, who was elected in March, spent about 30 minutes with Benedict in an ex-convent on the Vatican grounds where the former pope has been living in near isolation.

"It's a pleasure to see you looking so well," Francis told Benedict, who in February became the first pope in 600 years to step down instead of ruling for life.

Television footage released by the Vatican - only the fourth time Benedict has been filmed since his resignation - showed him looking alert and in better health than on previous occasions.

He greeted Francis, 77, at the door of the residence, standing with an ivory-handled wooden cane. They walked to a chapel where they stood and prayed before speaking privately in another room.

When Francis left Benedict, he said, "Merry Christmas, pray for me." Benedict responded, "Always, always, always".

Benedict resigned on February 28, saying he no longer had the physical and spiritual strength to lead the 1.2 billion-member Roman Catholic Church.

Maduro meets with Fidel Castro

The Venezuelan president, Nicolas Maduro, visiting with Fidel Castro, right, in Havana, Cuba, on Saturday.

The Venezuelan president, Nicolas Maduro, says he met with former Cuban leader Fidel Castro in Havana and the two men talked at length about their late friend, Hugo Chavez.
Maduro said on Saturday on his personal Twitter account that he travelled to Cuba to meet Castro and celebrate the anniversary of the creation of the regional bloc ALBA, which was founded by Chavez nine years ago.
Venezuela’s president said Castro ‘talked at length about Chavez’ and recalled the first time they met in Havana in 1994. Chavez, Maduro’s mentor, died of cancer in March.
Maduro didn’t say when he arrived in Cuba or how long he would stay.
Maduro, who has close ties to the government of the president, Raul Castro, also visited Cuba in July.

Party-poopers Bayern triumph in Club World Cup

Bayern Munich swatted aside Raja Casablanca 2-0 in a one-sided Club World Cup final on Saturday that did little to boost the credibility of a tournament which struggled to an anti-climax.

Morocco came to a standstill, an army of Raja fans travelled 250km to the game and King Mohamed was among the 37,000 crowd only for party-pooping Bayern to wrap it up under half an hour.

Defender Dante and midfielder Thiago Alcantara scored the goals on a chilly evening as Bayern added to the Champions League, Bundesliga and German Cup titles they won last season and continued European dominance of the tournament.

European teams have won six of the last seven titles, with Brazilian side Corinthians interrupting the sequence last year, and Saturday's stroll may reinforce the view that it is little more than a pleasant excursion for them before the winter break.

Bayern scored five goals without conceding any in their two games as they added to the two Intercontinental Cup titles they won in 1976 and 2001. They emulated Manchester United, in 1999, and Inter Milan, in 2010, by winning a league, cup, Champions League and world club quadruple in the same year.

Raja, who changed coaches one week before the start of the tournament, had qualified as champions of host nation Morocco rather than of Africa and had already stunned the Concacaf representatives Monterrey and South America's Atletico Mineiro.

But a powerful Bayern team, unbeaten in the Bundesliga since October last year, proved a bridge too far for a side who are a modest ninth in their own league.

NERVOUS HOSTS

"They were a little bit nervous because of the crowd, and the presence of his majesty the King," Raja coach Faouzi Benzarti told reporters. "We were not very aggressive, we were a bit soft."

Benzarti said he was already preparing his players for the less glamorous world of the Moroccan Botola Pro league.

"It will be difficult but we have to return to reality," he said. "We will do everything we can for them to be prepared. This competition will be here again next year, so we have to win the title to qualify again."

His opposite number Pep Guardiola was critical of his Bayern team for not creating more chances after they had gone ahead.

"We started well and played a very good half hour but after that we forgot to attack," he said. "It's not easy to play against a team when you're 2-0 up and you don't know them very well.

"We have to play until the last minute, that's what our profession demands. We passed the ball well but without much intention of creating chances."

Guardiola, who won the same tournament as coach of Barcelona in 2009 and 2011, said the credit lay with predecessor Jupp Heynckes who led Bayern to the treble last season.

"This belongs much more to Jupp and his team than to us," he said.

FALSE NINE

Guardiola started without a recognised striker as winger Xherdan Shaqiri replaced Mario Mandzukic.

Raja, the second team from outside Europe or South America to reach the final, were only briefly in the contest. Mouhssine Iajour fired wide from a half chance in the fifth minute and from that moment the hosts were chasing the game.

Two minutes later, Jerome Boateng headed on a corner to Dante who was left all alone in the penalty area and scored emphatically with a shot on the turn.

Raja goalkeeper Khalid Askri was tested by Thomas Mueller and David Alaba before Thiago Alcantara scored from the edge of the area after Alaba pulled the ball back.

Bayern were in almost complete control with 73 percent of possession although goalkeeper Manuel Neuer offered Raja a chance with a poor clearance in the 38th minute and Chemseddine Chtibi's effort flew just wide of the goal.

The second half was a continuation of the pattern in the first period, with Bayern again enjoying nearly all the possession and Shaqiri hit the bar.

Raja occasionally looked dangerous. Iajour forced Neuer into his first genuine save with a close-range header in the 57th and he also had to block efforts by Vivien Madibe and Badr Kachani.

Obama warns South Sudan after US military aircraft attacked

President Barack Obama was briefed by his national security team on Saturday after four US military service members were wounded when their aircraft were fired upon during a mission to evacuate American citizens from chaotic South Sudan.

"Any effort to seize power through the use of military force will result in the end of longstanding support from the United States and the international community," the White House said in a statement following Obama's call with National Security Adviser Susan Rice and other top aides.

The president, who is vacationing in Hawaii, directed his team to ensure the safety of US military personnel, and to continue to work with the United Nations to evacuate American citizens from Bor, which is caught up in the spiraling conflict in South Sudan.

After the call, Obama "underscored that South Sudan's leaders have a responsibility to support our efforts to secure American personnel and citizens in Juba (South Sudan's capital) and Bor," the White House said.

The US aircraft - three Osprey CV-22s - came under fire while approaching the evacuation site, the US military's Africa Command said in a statement.

"The aircraft diverted to an airfield outside the country and aborted the mission," it added.

On Thursday, Obama said that South Sudan, which achieved independence in 2011 to become Africa's newest nation, "stands at the precipice."

Earlier in the week, Obama deployed 45 US service members to the land-locked country "to support the security of US personnel and our Embassy."