Research In Motion CEO Provides Promised Business Update
As previously promised, Thorsten Heins has provided a business update on what is going on at RIM since he took control.
I don’t think there is anything in the Press release that is really much of a surprise.
The statements are more or less what we expected including them planning on continuing to evaluate their organisational structure to eliminate fragmentation, duplication, and inefficiencies while still hiring in key areas related to launching BlackBerry 10.
The biggest news was that Rim has hired JPMorgan and RBC Capital Markets to review the company’s business and financial performance. This basically means that everything and anything is on the table.
RIM, which has seen its market share eroded in recent years, made the announcement after the bell. The company also said it expects an operating loss in the current quarter.
After being halted briefly, RIM shares fell sharply in after-hours trading.
RIM has asked the banks to evaluate the merits of various strategies, including a business model overhaul or less dramatic moves such as expanding the BlackBerry platform through partnerships and licensing deals.
The move comes as RIM prepares for a major restructuring in the next couple of weeks that will see it eliminate at least 2,000 jobs worldwide. This is a significant blow to the company, even if it’s something RIM can first control and secondly execute at its own pace.
James Brehm, a senior strategist for Compass Intelligence said after the announcement:
Mark McKechnie, an analyst at ThinkEquity LLC said:
RIM reported a fourth-quarter loss in March, when the new CEO announced the initial steps in a strategic overhaul. Heins took over from longtime co-CEOs Mike Lazaridis and Jim Balsillie in January.
RIM has already been through one round of restructuring. Last July it announced plans to cut about 11 percent of its workforce, or 2,000 jobs.
RIM is holding on to anyone related to BlackBerry 10, the company’s forthcoming operating system designed for its next generation smartphones. Since the departure of his former bosses, current chief executive Thorsten Heins is hedging his bets on BlackBerry 10 to the point where if you’re not “in it to win it,” you can leave the company.
Analysts are clearly stating that recovery for Rim look bleak.
Analyst firm Asymco explains in a helpful graph the “consequences of failure to profit” from the smartphone market, that pinpoints where mobile phone makers have hit a decline — and will likely never recover.
“Nokia, LG and RIM [have] joined the ‘endangered species list’. If the pattern repeats, then RIM and Nokia are in early phases of what promises to be an extended period of pain followed by an exit,” analyst Horace Dediu explains.
RIM has a problem. If Asymco is right and RIM cannot recover from the depths it found itself in, BlackBerry 10 is not going to bring the company back to its once-proud status.
By cutting jobs in all departments bar those associated with BlackBerry 10, the company runs the risk of alienating the other areas of the business that may be palatable for sale in the future; that is if RIM ever starts to look for an end-game solution.
Press Release
Waterloo, ON – Research In Motion Limited (RIM) (Nasdaq: RIMM; TSX: RIM), a world leader in the mobile communications market, today provided a business update from Thorsten Heins, the Company’s President and CEO.
“During the Q4 2012 and fiscal year-end financial results conference call on March 29, I said that I would provide our shareholders with candid and timely updates when possible on the progress and challenges RIM is experiencing. While we are no longer giving quantitative financial guidance, I wanted to provide a brief business update at this time, and will provide more details when our Q1 financial results for the quarter ended June 2, 2012 are released on June 28.
In terms of challenges, as I mentioned on the March financial results conference call, RIM is going through a significant transformation as we move towards the BlackBerry 10 launch, and our financial performance will continue to be challenging for the next few quarters. The on-going competitive environment is impacting our business in the form of lower volumes and highly competitive pricing dynamics in the marketplace, and we expect our Q1 results to reflect this, and likely result in an operating loss for the quarter. We are continuing to be aggressive as we compete for our customers’ business – both enterprise and consumer – around the world, and our teams are working hard to provide cost-competitive, feature-rich solutions to our global customer base. On the positive side, we expect to further increase our cash position in Q1 from the approximately $2.1 billion we had at the end of fiscal 2012.
Despite the current challenges, we have made significant progress on a number of fronts in the past few months: – Our annual BlackBerry World conference and BlackBerry 10 Jam took place earlier this month and both were tremendously successful. More than 5,000 developers, partners, carriers and enterprise customers from 115 different countries saw the first glimpses of our next-generation BlackBerry 10 platform and their response was encouraging. – Our developer partners have been enthusiastic with the BlackBerry 10 Dev Alpha prototype unit we distributed at BlackBerry World and many are well underway in developing applications to be ready for the launch of BlackBerry 10 in the latter part of calendar 2012. – The support and enthusiasm from our developer community is also reflected in our app growth, where we now feature more than 80,000 apps, which represents a 220% increase from one year ago, and more than 15,000 apps for PlayBook compared to less than 2,000 last year. We believe this bodes well for our ecosystem as we get set to launch BlackBerry 10. – We are making steady progress with the innovation of our next-generation BlackBerry 10 mobile computing platform, which is still on track to launch in the latter part of calendar 2012. – Our global subscriber base continued to grow this quarter to approximately 78 million, driven primarily by growth in international markets, which is partially offset by high churn in the United States, and our BBM user base has grown to approximately 59 million users globally. – Our strong brand internationally was recently enhanced with the successful launch of two new BlackBerry 7 phones in India and Latin America.
We continue to make strategic changes to RIM’s senior management team with the hiring of two key new members to RIM’s executive leadership team. Kristian Tear, our Chief Operating Officer, whose background also includes extensive experience in international sales in Europe, Asia and Latin America, and Frank Boulben, our Chief Marketing Officer, who will provide our team with deep experience in the mobile computing and communications industry. Both will assist me and the existing executive team as we continue to make the organizational changes necessary to position RIM for the future and prepare for the launch of our new BlackBerry 10 platform.
The CORE (cost optimization and resource efficiency) program we told you about previously is focused on delivering key operational savings through various initiatives. The financial objectives for the CORE program are targeted to drive $1 billion in savings by the end of fiscal 2013, based on our Q4 run rate. We are targeting better efficiency and use of resources in our sales and marketing initiatives to effectively leverage marketing windows and evaluate our country portfolio to determine where it makes sense for us to prioritize our efforts. We will also continue to review RIM’s organizational structure and clearly define accountabilities for all key businesses and business processes with a goal of eliminating fragmentation, duplication and inefficiencies. While there will be significant spending reductions and headcount reductions in some areas throughout the remainder of the fiscal year, we will continue to spend and hire in key areas such as those associated with the launch of BlackBerry 10, and those tied to the growth of our application developer community. We will share more details regarding our progress throughout the year as programs are implemented or changes are completed.
To further enhance our commitment to successfully completing our transformation, after the release of our year-end financial results, we engaged J.P. Morgan Securities LLC and RBC Capital Markets to assist the Company and our Board of Directors in reviewing RIM’s business and financial performance. These advisors have been tasked to help us with the strategic review we referenced on our year-end financial results conference call and to evaluate the relative merits and feasibility of various financial strategies, including opportunities to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives.
Although we are facing challenges, we remain excited about BlackBerry 10 and believe that this platform coupled with the results of the strategic review will create long-term value for our stakeholders. We will provide another more detailed business update when we report our first quarter results in June.”
Q1 Results Conference Call Details RIM will be reporting results for the first quarter of fiscal 2013 on June 28, 2012 after the close of the market. The Company will discuss today’s announcement and first quarter fiscal 2013 results on a conference call and live webcast beginning at 5 pm ET, June 28, 2012. The call can be accessed by dialing 1-800-814-4859 or at www.rim.com/investors/events/index.shtml. A replay of the conference call will also be available at approximately 7 pm by dialing 1-416-640-1917 and entering passcode 4501363#. A replay of the webcast will be available clicking the link above. The replay will be available until midnight ET July 12, 2012. The conference call will also appear on the RIM website live at 5 pm ET and will be archived at http://www.rim.com/investors/events/index.shtml.
Reuters contributed to this report. Image Credit: Asymco
