Research In Motion (NASDAQ:RIMM) is delaying the launch of its BlackBerry 10 platform until the first quarter of 2013 and is going to cut 5,000 of its 16,500 employees as it works to stay afloat amid its transition to the new platform.
RIM had previously said it would release Blackberry 10, on which it is betting its future, by the end of 2012. The delay could undercut its attempts to catch up with Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT) in smartphones.
The job cuts are also larger than many analysts had anticipated. RIM said that the 5,000 job cuts will be completed by the end of its fiscal year. RIM CEO Thorsten Heins called the cuts difficult--but necessary--steps as it goes through its transition.
On the company's earnings conference call with investors, Heins said he was not satisfied with RIM's performance but that it is "not standing still" and the company is moving as quickly as it can toward the BlackBerry 10 launch. He said RIM is working to integrate new features into BlackBerry 10, and that the delay is not a reflection of the quality of the platform, but rather RIM's ability to integrate all of the features and deliver a solid product to market.
"I will not deliver a product to the market that is not ready to meet the needs of our customers or provide anything less than an outstanding user experience with the quality I expect a BlackBerry product to have," he said, according to a Seeking Alpha transcript of his remarks. "There will be no compromise on this issue."
The beleaguered company has hired JPMorgan Chase & Co. and RBC Capital Markets to advise it on strategic options. Heins said on the call that the options "range from RIM executing on its plan, stand-alone, to whatever other model you could think about."
"However, this is not the time to share any detail," he said. "We will share the details and the progress we're making when we have those results. And it's actually also a matter of the board deciding on what strategic direction they want to take the company into."
According to a Reuters article, which cited unnamed sources, Microsoft CEO Steve Ballmer approached RIM during the past few months, looking to strike a partnership similar to the one Microsoft has with Nokia (NYSE:NOK), which is for Windows Phone. Microsoft would buy a stake in RIM and cover its marketing expenses. However, the report said RIM's board does not prefer this option and would like to see the company follow through on its launch of BlackBerry 10.
Other options include spinning off RIM's handset business, or selling its proprietary BlackBerry network to a private equity firm or a technology company, the report said. The network would be opened up to other companies, such as Apple and Google, under that scenario.
As expected, RIM delivered grim results in its fiscal first quarter as declining sales weighed the company down amid its transition to the BlackBerry 10 platform.
The quarter, which ended June 2 for RIM, was a rough one financially. RIM reported revenue of $2.8 billion, down 33 percent from $4.2 billion in the previous quarter and down 43 percent from $4.9 billion in the year-ago period. RIM also reported a net loss of $518 million, compared to a net loss of $125 million in its last quarter and net income of $695 million in the year-ago quarter. RIM expects to have an operating loss in the next quarter.
RIM, in the quarter, shipped 7.8 million Blackberry smartphones, down from 11.1 million in the last quarter and 13.2 million in the year-ago period. The company also shipped 260,000 PlayBook tablets, down from 500,000 in the previous quarter and year-ago period.
The results were not unexpected. In late May RIM cut its quarterly outlook, saying it expected to post an operating loss due to deteriorating sales and price cuts it made to devices.
RIM is also in the midst of a review and restructuring of its business operations, including its supply chain. The ODM Celestica announced earlier this month that it would be winding down its manufacturing operations for RIM over the next three to six months. Reports have also indicated that RIM has already started laying off employees. RIM executives, including Heins, have publicly said they are aiming to cut expenses by $1 billion by the end of the fiscal year. Now the company reports that the $1 billion target will be a minimum and that it may make more cuts to its expenses.
During the past 12 months, RIM's stock has fallen from a high of $32.55 per share to below $10 today. And the company's U.S. market share has fallen from around 27 percent in March of 2011 to 11.6 percent in April 2012, according to research firm comScore.
- see this release
- see this Seeking Alpha transcript
- see this Reuters article
- see this separate Reuters article
- see this Bloomberg article
- see this WSJ article (sub. req.)
Report: Facebook, Amazon interested in RIM's handset unit
Report: RIM starts shedding jobs as part of restructuring
RIM loses ODM Celestica as a hardware supplier
RIM pays out millions to current and former CEOs
Analysts skeptical about RIM's turnaround potential
RIM expects operating loss in Q1, hires bankers to look at 'strategic' opportunities