Looks like Silent Circle, the company behind the ultra-secure Blackphone and Blackphone 2, may be in trouble. To start with, court documents have revealed that the company is facing a $5 million lawsuit from the former owners of Geeksphone over unpaid debts. However, Silent Circle’s woes don’t stop there.
It seems as though the managers at Silent Circle have made a series of bad managerial decisions, especially when it came to the original Blackphone, all of which led up to the lawsuit, according to a report from Forbes.
Silent Circle initially partnered with Geeksphone for the original Blackphone. Later, Silent Circle bought out Geeksphone’s stake in Silent Circle for a hefty $30 million. Why did it pay so much? Well, apparently Geeksphone told Silent Circle that the Blackphone would make as much as $750 million in revenue in 2015 alone. That’s a bit of an optimistic estimate — the device ended up only making $10 million.
As Android Police notes, LG’s mobile division made $3.2 billion in 2015, so Geeksphone was basically telling Silent Circle that the Blackphone would make around a quarter of LG’s entire mobile business.
If that wasn’t crazy enough, according to the court documents, Silent Circle actually believed this claim. Of course, it’s perhaps possible that Silent Circle believed this because Geeksphone told Silent Circle that it had distribution with mobile carriers for up to 250,000 handsets, most of which obviously never came to fruition — while their sole customer originally committed to 100,000 phones, in the end only bought 6,000.
The result of this mess is that Silent Circle has been “borrowing money.” In fact the company alleges that the parts for the Blackphone 2 were largely bought with borrowed money. While the company considered filing for bankruptcy at the end of last year, a $20 million investment seemingly changed its course. Silent Circle never actually announced this investment, and that’s likely due to some serious strings that would have been attached to such a deal.
Silent Circle does say that it’s working on the Blackphone 3, however it seems as though the device will be made through a partner, not in-house. Of course, its entirely possible the company won’t even get that far.