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RIM warns of operating loss, layoffs to come

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By Rob Gillies
Associated Press
Published:
TORONTO -- Struggling BlackBerry-maker Research in Motion warned Tuesday that it will have an operating loss in its current March-June quarter and said there will be significant layoffs this year.
RIM also said in a release that it has hired J.P. Morgan and RBC Capital Markets to help the company evaluate various strategies, including opportunities to partner with other companies and license software as well as other alternatives.
Waterloo Ontario-based RIM, a pioneer in the smartphone market, made no mention of a sale of the company but new chief executive Thorsten Heins did not rule it out after RIM's last earnings were released in late March.
"It's a disaster, it's bad," Jefferies analyst Peter Misek said. "The problem is you can't see a path to a sale until you stabilize the business."
Misek said if the advisers weren't brought in to consider a sale originally they are likely considering it now. Misek expects RIM to announce as many as 5,000 layoffs soon.
RIM's stock was halted in after-hours trading Tuesday. When trading resumed shares fell more than 10 percent, or $1.20, to $10.03.
The once-iconic BlackBerry company is facing the most difficult period in its history. RIM is working on the launch of a new software operating system just as North Americans are abandoning their BlackBerry's for Apple's iPhone and smartphones that run Google's Android software.
RIM's U.S. share of smartphones dropped from 44 percent in 2009 to 10 percent in 2011, according to market researcher NPD Group. The company still has 78 million active subscribers across the globe, but Apple and Android phone makers such as Samsung and HTC are taking market share.
"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 (current quarter's) results to reflect this, and likely result in an operating loss for the quarter," new chief executive Thorsten Heins said.
Heins, formerly a little known chief operating officer at RIM, took over in January after RIM founder Mike Lazaridis and longtime executive Jim Balsillie stepped down as Co-CEOs after the company lost tens of billions in market value.
RIM said there will be staff reductions among its 16,500 employees and significant spending cuts as the company looks to save a $1 billion -- even as it transitions to its much-delayed "BlackBerry 10" software platform expected out later this year.
RIM reiterated that its financial performance will continue to be challenged for the next few quarters.
Misek believes that had BlackBerry 10 been released last year, the company might have had a chance, but he said now RIM is likely to release the new BlackBerrys right when Apple is due to introduce a new iPhone.
RIM is following the same trajectory as struggling Finnish handset makers Nokia and California-based Palm, both of which attracted consumers with trend-setting phones and technologies in their heyday, only to be outmaneuvered by competitors. In Canada, there is fear that RIM could go the way of former Canadian tech giant Nortel, which declared bankruptcy in 2009 and was picked over for its patents.

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