RIM cutting 5,000 jobs, delaying BlackBerry 10 launch
Published Thursday, June 28, 2012 9:49AM EDT
Last Updated Thursday, June 28, 2012 10:50PM EDT
Beleaguered BlackBerry maker Research In Motion announced Thursday it’s cutting 5,000 jobs and delaying the launch of the BlackBerry 10 smartphone after reporting a net loss of US$518 million in its last quarter.
RIM’s revenue is down 33 per cent, from $4.2 billion to $2.8 billion, according to figures released Thursday. Its share price has dropped about 70 per cent over the past 12 months.
The struggling company, once the most profitable Canadian tech firm, was expected to launch its new smartphone later this year. Many analysts thought the new product could help boost RIM’s falling share prices and successfully compete against the popular Apple and Android devices.
But BlackBerry 10 is now scheduled for release in early 2013 and will miss the crucial holiday shopping season this winter.
"I am not satisfied with these results and continue to work aggressively with all areas of the organization and the board to implement meaningful changes to address the challenges," RIM’s new chief executive, Thorsten Heins, said in a news release.
"Our top priority going forward is the successful launch of our first BlackBerry 10 device, which we now anticipate will occur in the first quarter of calendar 2013."
Heins said he was not willing to “compromise the product” by launching it before it’s ready.
RIM shares plunged roughly 15 per cent in after-hours trading on the Nasdaq Thursday, landing at US$7.86 a share.
The shares closed up two cents at $9.46 on the Toronto Stock Exchange during regular day trading.
After reporting such “dismal” figures, RIM needs to “reduce costs as quickly as it can before it starts hemorrhaging cash,” Ed Snyder, a wireless telecom industry analyst and managing director of Charter Equity Research in San Francisco, told CTV News Channel.
Snyder and a number of other analysts believe that, with only $2.8 billion in cash left, RIM can stay afloat for another year to 18 months.
Investors are “highly pessimistic” about RIM’s future, Snyder said. The company’s astonishing downfall has been largely blamed on mismanagement and the inability to quickly adapt to the fast-changing and highly competitive handset and tablet markets.
RIM’s co-founders, Mike Lazaridis and Jim Balsillie, stepped down as co-CEOs in January amid intense pressure from investors. They handed the baton to Heins, a largely unknown RIM executive, but experts say turning such a large company around in a just a few months would have been a nearly impossible task for anyone.
Snyder said he understands why Heins chose not to release the BlackBerry 10 if it’s not good enough to compete with the latest iPhone and Samsung models.
“What would you rather have? A product go out the door in the fall and lose 25 cents on the dollar or a product go out in January and maybe break even,” he said.
Despite the seemingly disastrous situation, RIM can still mount a recovery effort, which needs to include more cost-cutting and layoffs, Snyder said.
RIM also needs to focus on its strengths, such as its solid infrastructure, security features and continued support from mobile phone carriers, he said.
Still, RIM expects to report a further operating loss in the second quarter of 2013.
"I understand that this is an incredibly difficult message to deliver, but it is necessary," Heins said in a conference call.
Heins said Thursday the 5,000 job cuts are part of RIM’s efforts save $1 billion to make up for recent losses. The company will also reduce the number of different BlackBerry devices on the market and outsource more of its non-core functions.
When Heins arrived at the helm, he said selling RIM was far from his mind, but he has not ruled out the idea. Questions are now swirling over whether Heins would be willing to sell off parts of the company.
Heins said RIM is “aggressively working” on a strategic review of its operations and consulting with advisers on how to restructure its business. Last month, the company hired J.P. Morgan and RBC Capital Markets to help turn around RIM’s financial performance.
Heins also announced Thursday the appointment of a new chief legal officer, Steve Zipperstein, who was formerly a general counsel for Verizon Wireless.
With files from The Canadian Press