RIM delays new BlackBerry launch as problems deepen

By Reuters 29 June 2012

Research In Motion Ltd delayed the make-or-break launch of its next-generation BlackBerry phones until next year, in a devastating setback to the once-dominant technology company whose sales are crumbling. By Alastair Sharp.

Shares in the company, which also announced a steeper-than-expected quarterly operating loss, plunged 18 percent after it said it would release its revamped BlackBerry 10 devices early in 2013, instead of late this year, because the development had “proven to be more time consuming than anticipated.”
The delay in releasing the devices – RIM’s last best hope of stemming its eclipse at the hands of Apple Inc.’s iPhone and Google’s Android phones – confirmed the worst fears of analysts and investors.
Combined with the size of the loss, its first for eight years, and the likelihood that sales keep sliding into 2013, it narrows the window through which RIM must climb if it is to survive as an independent entity.
RIM’s announcement that it would slash 5,000 jobs, or 30 percent of its workforce, only reinforced the impression of a company that could be in terminal decline.
“It’s like watching a puppy die. It’s terrible,” said Matthew Thornton, an analyst at Avian Securities in Boston.
“Wow, what a disaster,” said Edward Snyder, managing director of Charter Equity Research in San Francisco, who said RIM was now in “a handset death spiral.”
“From a numbers point of view it could hardly be worse and it’s going to deteriorate from here,” he said.
RIM, which virtually invented mobile email, has fallen from a leadership position to an also-ran in smartphones over a few short years filled with delayed and uninspiring products, service outages and other embarrassments.
Now its new BlackBerry line will miss both the back-to-school and Christmas shopping periods, while the competition brings out new phones with more bells and whistles.
Apple is widely expected to unveil an iPhone 5 later this year, while a slew of manufacturers using Google’s Android software are constantly pushing out new gadgets. Microsoft’s alliance with Nokia is also gaining traction.
“There’s really no guarantee that once they come out on the other side of BlackBerry 10 that it’s going to be something that people will want,” said Eric Jackson, a hedge fund manager at Ironfire Capital in Toronto.
The job cuts will likely cost RIM $350 million in the current fiscal year. RIM has pledged to slash $1 billion from its operating costs in the year.
RIM now considers that $1 billion target as a minimum it will pursue given the additional BlackBerry 10 delay. It said it has already cut layers of management, streamlined its supply chain and outsourced repair work.
Shaw Wu, an analyst at Sterne Agee in San Francisco, said RIM will now have to be very careful going forward.
“Layoffs are not free – there’s a use of cash with that,” Wu said. “They have go be very careful with their cash balance. It’s a matter of survival now.”
Shares of RIM, which have dropped about 70 percent over the past year, dropped 18 percent to $7.50 in after-hours Nasdaq trading.
Its adjusted net loss came in at $192 million, or 37 cents a share, in the three months to June 2. Revenue declined 43 percent to $2.8 billion. The company had warned it would post an operating loss but had not provided specifics.
Analysts, on average, expected a loss of 7 cents a share on revenue of $3.07 billion, according to an informal Reuters poll.
In the same quarter a year ago, RIM reported net income of $6 95 million, or $1.33 a share, on sales of $4 .91 billion.
RIM said it expects to post another operating loss in the current quarter, as it ships fewer smartphones.
The company said it shipped 7.8 million BlackBerry smartphones in the last quarter, only about half of the more than 14 million it shipped two quarters ago. Until now, it had shipped more than 10 million devices every quarter since late in 2009. DM

Photo: RIM CEO Thorsten Heins poses for a portrait at the Research in Motion (RIM) company headquarters in Waterloo, Ontario, January 22, 2012.  REUTERS/Geoff Robins


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