Over the last year or two, an overriding theme in the wider smartphone world has been that of ‘security and privacy’. As a direct consequence of this, there has been a tendency for smartphone manufacturers to focus more closely on security and privacy. In fact, this movement largely paved the way for a number of security-centric manufacturers to come to light. One of the most prevalent in terms of the news was the collaboration between Silent Circle and Geeksphone (SGP Technologies) which resulted in the Blackphone and the follow up device, the Blackphone 2.
With such a focus on security, it would be expected that devices like the two Blackphones would be selling well. However, it seems that regardless of how many have been sold, it was not enough. Court documents which have now come to light specifically note that Silent Circle is now undergoing some significant changes due to what is considered to be vastly under-performing sales. However, to be clear, it is not so much that the sales have been low in general, but is more a matter of the sales being nowhere near the level of sales that had been expected by Silent Circle. A situation which the court documents reveal has led to some significant troubles for the company and big changes to the infrastructure in the future.
Back in February of this year, Silent Circle announced they had bought up the remaining interests in SGP Technologies and essentially taken full control. This actually seems to be the basis of the court documents as Geeksphone is now seeking about $5 million for unpaid debts resulting from that outright purchase. However, the documents are revealing that from Silent Circle’s point of view, they were somewhat misled on how well the performance of Blackphone would do following the purchase. That is, both at the consumer level and at the business level. According to the details, Silent Circle were under the impression that the business sector alone was likely to see sales of close to 250,000 units, a result of believed agreements with the likes of BigOn Telecommunications, Kumion and America Movil. Although the reality of the units that were actually sold has been significantly lower, to say the least. As a result, the details emerging is that Silent Circle has incurred significant financial losses due to the under-performance of the Blackphone(s) against expectations. The details also reveal that Silent Circle is revising its business strategy “to dramatically cut costs and focus on its core software business.” With the expectation that in the near future, “Silent Circle will be terminating dozens of employees and otherwise reducing its operating costs by around 50 per cent.” Moves which are with a view to the company focusing more on the software side of things and absorbing the losses incurred through the hardware business.
As part of the ongoing debate over the contested $5 million, it seems Silent Circle attribute the blame to the situation squarely on Geeksphone and their suggesting that (prior to the acquisition of SGP by Silent Circle), forecast revenue was said to be in the region of $750 million for 2015 alone. This figures stands in stark contrast to the $10 million said to have been made during the actual period the $750 million equates to. With Silent Circle stating that these figures played a pivotal role in convincing Silent Circle to buy out Geeksphone in the first place.