RIM cuts jobs, reports quarterly loss
It isn't over for Research in Motion (RIM.TO, RIMM), but it may as well be.
In the leadup to Thursday's analyst call to share the financial results from its just-completed first quarter, investors had been expecting disastrous results. So the company's largest-ever top- and bottom-line losses hardly came as a surprise. Still, the barrage of bad news only served to reinforce just how dire RIM's situation has become, and how incapable is seems to be of extricating itself from a deepening crisis that increasingly threatens the company's long-term survival.
The BlackBerry maker lost $518 million U.S., or 99 cents per share, during its most recent quarter, compared to a $695 million, or $1.33 per share profit from the year-ago quarter. Removing one-time items such as a non-cash goodwill charge, RIM's operational loss was $192 million, which significantly missed analyst expectations. Revenue of $2.81 billion for the quarter also fell short of expectations of $3.1 billion, and was 42% below the $4.91 billion recorded a year earlier. BlackBerry device shipments plummeted 41%, from 13.2 million in Q1 2011 to 7.8 million this past quarter. This threatens the global installed base of BlackBerry devices — reported last quarter at 78 million — and the $4 billion in annual network services subscription revenue that they bring in.
More than just numbers
Beyond the frightening financials, however, was the sheer human cost: RIM, which has been quietly terminating small batches of employees for weeks, announced it would be laying off 5,000 employees. And in possibly the worst piece of news to come out of a chapter already rife with it, the company announced yet another delay in bringing smartphones based on the new BlackBerry 10 operating system to market. RIM now targets retail availability for Q1 2013, well over a year behind when the new offerings were initially slated for release. CEO Thorsten Heins said unanticipated difficulties in integrating a range of new features into the all-new software were to blame for the pushback.
Whatever the cause, the BB10 delay sets the company up for at least another year of withering performance as demand for now-obsolete BlackBerry 7-based devices dries up and consumers and businesses, tired of waiting for RIM's vapourware, seek alternatives from competitors. Even if the new devices hit the market as currently promised, it'll take at least six months post-launch for them to fill the channel and have a material impact on revenues. Assuming, of course, that buyers take the bait.
Look further ahead
Michael Davies, Chairman of Endeavour Partners and a senior lecturer at MIT, says RIM's bet-it-all focus on bringing BlackBerry 10-based smartphones to market could be somewhat myopic.
"RIM has to remake itself not just for the iPhone and Android era, but for the iPad and post-PC era of the consumerisation of corporate IT," he says. "It's got to skate to where the puck is going to be, and this puck is picking up speed, not slowing down."
Davies says even if BB10 turns out to be everything has promised, it likely won't be enough, and says no one product can turn the company's fortunes around.
"It needs both a pipeline and a portfolio of products, and to rebuild its complete business ecosystem," he says, adding that beyond bringing new offerings to market, RIM needs to "most importantly figure out what makes it relevant."
More needs to be done
While slicing 5,000 jobs and reducing its burn rate to conserve cash are all crucial elements of maximizing its ability to survive the deepening, lengthening crisis, these measures aren't enough to see the company through to the other side.
"Deep cost cuts will be necessary, but not sufficient," says Davies. "It needs to have a new sense of purpose, to do someone meaningful and worthwhile, to motivate the people creating the products and working with its customers. Get lean, get fit, learn to skate very differently."
On Thursday's analyst call announcing the results, Heins reiterated the mantra he's shared repeatedly since taking the job in January, namely that he'd rather take the time to ship a fully baked BB10 than rush an incomplete product to market. RIM was burned on this very issue last year when it released the PlayBook tablet without built-in email, scheduling and contact management applications.
"I will not deliver a product to the market that is not ready to meet the needs of our customers," he said. "There will be no compromise on this issue."
While that may very well be the case, by the time BB10 is ready to see the light of day, it may in all likelihood be too late to save RIM from being broken up and sold for parts. This last delay could easily push the company past the point of no return, beyond which product alone won't be enough to save it in its current form.
Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. firstname.lastname@example.org