Court documents have revealed security firm Silent Circle is struggling to shift its 'NSA-proof' Blackphone, after numerous difficulties with distributor deals and alleged inaccurate revenue projections.
The revelation comes courtesy of Forbes writer Thomas Fox-Brewster who has gone through the documents related to a $5 million lawsuit brought by former owners of Spanish smartphone maker Geeksphone.
Silent Circle bought out Geeksphone after the two companies collaborated on the first Blackphone in 2014. But the former Geeksphone owners are now alleging the firm is yet to pay them significant debts related to the $30 million buyout.
Following Edward Snowden's surveillance disclosures, the Blackphone had the potential to be a big seller among the increasingly privacy-conscious public.
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The Blackphone 2
In response to the lawsuit, Silent Circle alleges Geeksphone advised, before the buyout was finalised, the phone itself would make close to $750 million in revenue.
In reality, the original smartphone managed to rack up $10 million in revenue in 2015, with hopes for 250,000 orders amounting to just 6,000 after deals with two out of three distributors fell through.
Job losses ensued, with Silent Circle laying off 20 of its employees, amounting to 15% of its workforce.
The company then focused its efforts on the Blackphone 2, with Silent Circle general counsel Matt Neiderman writing in a letter to Geeksphone: ”In short, the hardware business has proved to be a significant financial drain for Silent Circle.
"Because of the large purchase orders that proved to be bogus, Silent Circle borrowed money to purchase inventory and parts ahead so that it would be able to deliver devices to meet the demand it believed it had and focused most of its resources on preparing for the launch, marketing and sale of the Blackphone 2."
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He goes on to write: "However, with sales lagging far behind even the most conservative estimates, Silent Circle has been forced to attempt to raise additional operating capital so that it can refocus its efforts on its software business and absorb the losses from the hardware operations."
Silent Circle also blames the phone's poor performance on Geeksphone's design, which it claims amounted to "poor specifications" and "underperforming but overpriced hardware".
Despite the failure of the previous models and the new focus on the "software business", the firm has apparently not ruled out a Blackphone 3.
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What do you think of the Blackphone 2 and Silent Circle's legal trouble? Let us know in the comments.