RIM to cut jobs, delay BlackBerry 10 launch
The outlook for BlackBerry maker Research in Motion darkened Thursday as it reported worse-than-expected losses and announced it would delay the rollout of its new smartphone and slash a third of its workforce.
Trading was halted but when it resumed after the close of regular trading, RIM shares plunged by 15% to $7.75 at one point.
Research in Motion, which saw sales of its BlackBerry hand-held devices fall sharply, said it posted a loss of $518 million, or 99 cents a share, for the quarter that ended June 2. It generated $2.8 billion in sales, down 43% from the same period last year.
“This was a challenging quarter on many fronts, and I’m not satisfied with the financial performance we are reporting today,” Chief Executive Thorsten Heins said on a conference call with investors after the market closed Thursday. “However, I want to assure you we are not standing still.”
Once Canada’s most valuable company, Research in Motion’s popularity among consumers has fallen precipitously on the rise of Apple and Android phones. RIM’s U.S. market share for smartphones has fallen to 12.3%, according to a report last month from ComScore. That figure was 43% just two years ago.
The company said that its new line of phones, BlackBerry 10, will not launch until the beginning of 2013.
RIM argued that the upcoming BlackBerry 10 is not just a product but a platform with long-term shareholder value, but analysts said the new device probably would not be enough to pull the company out of its slump.
“It’s obviously a big disappointment,” said Shaw Wu, an analyst at Sterne, Agee & Leach. “They talk about how they want to produce a new product with BlackBerry 10, but frankly we think at this point the priority is cash preservation and survival.”
To cut costs, the company is shedding 5,000 jobs, or about a third of its workforce, by the end of this year. RIM began laying off employees as part of its $1-billion cost-saving plan last week.
Analyst Mark McKechnie of ThinkEquity said the cuts could actually compound long-term problems for the company.
“Clearly, if you’re going to lay off 5,000 people, it’s going to be real challenging to keep morale up and developing products,” McKechnie said. “I’ve been arguing against the handset business and for opening up their platform to Apple and Android, but it appears they might be too late.”
The next several quarters will be difficult, Research in Motion said. The company said it expects to report an operating loss in the second quarter as it restructures and fights for space in the competitive mobile device market.
The company hired Heins in January to replace the team of co-executives Jim Balsillie and Mike Lazaridis and to lead its recovery.
RIM has lost about 70% of its market value since last June. The company is now valued at less than $5 billion.
In May, the company hired two investment firms to help consider options, including the possibility of putting itself up for sale.
“When we emerge from this transition period, we want to move forward with clean and nimble organization,” Heins said.
BlackBerry smartphone shipments in the quarter were 7.8 million, down from more than 13 million a year ago. Research in Motion said it shipped 260,000 BlackBerry PlayBook tablets compared with 500,000 in the year-earlier period.
“Between now and BlackBerry 10, you’re kind of looking at a valley,” McKechnie said. “Truly, the clock is ticking.”