Canadian technology giant Research In Motion faces a crucial test in the months ahead as the company works to bring new devices to market while weathering a slowdown in sales, telecom and industry observers say.
The smartphone-maker said Tuesday it expects to make significant layoffs and will report a first-quarter operating loss due to weak sales of the once-ubiquitous BlackBerry.
It also announced that two outside companies, JP Morgan and RBC Securities, were being brought in to advise on strategic options to improve its performance – including the possibility of a full or partial sale of the company.
“From what we can tell, it looks like all things are on the table” as RIM looks for strategic alternatives, said Troy Crandall, an investment analyst with MacDougall, MacDougall & MacTier.
There have been suggestions, including from some of RIM's shareholders, that the company could separate operations that make the BlackBerry smartphones and PlayBook tablets from the operations responsible for networks and intellectual property.
Another possibility would be a more focused approach on fewer product lines, with greater emphasis on the business and government sectors and less on consumer-oriented devices that compete with Apple, Samsung and others.
RIM also owns a trove of thousands of patents, for which there could be significant demand.
To boost sales and combat its falling share price, RIM’s top priority will be to launch its much-anticipated BlackBerry 10 devices later this year, Crandall said.
But that could mean lower than normal sales through the summer months.
“It’s hard to sell a handset when you’re telling everyone that a great new handset is on its way,” Crandall said. “It’s a really tough marketing job.”
No quick sell-off
The latest bad news from RIM has stoked speculation that the company could be destined for a hostile takeover, or that it may move quickly to sell parts of the company to potential customers such as Facebook or Microsoft.
RIM's shares, which reached a high of $140 US on the Nasdaq in 2008, closed down in Wednesday’s trading to $11.23 US on that stock exchange and $10.66 on the TSX.
But Krista Napier, a senior analyst at IDC Canada, said the decision to hire JP Morgan and RBC Securities doesn’t mean RIM is getting ready to sell assets quickly. It’s more likely that spinning off and selling parts of the company would take place after the launch of its next-generation software platform.
If the launch goes well and the new BlackBerry is a success, RIM would be in a better position to get more money for parts of the company it may be willing to shed, Napier said.
Thorsten Heins, RIM’s recently appointed president and CEO, unveiled the new BlackBerry 10 operating system earlier this month. Many analysts say the company needs a warm reception for the new BlackBerry and operating system in order to save the business, which employs more than 16,000 people.
Few bright spots
Queen's University business professor John Pliniussen said RIM needs to do a better job of focusing on the few bright spots in its operation.
“They have to let investors know they’re doing really well in the Middle East and in global markets,” he said.
“All of us hope and want RIM to come out of this new and invigorated,” he added. “It might be a very different-looking organization, but we don’t want another Nortel.”
RIM continues to outsell the iPhone in some countries, including in Latin America and the Middle East, and the company has been opening retail stores abroad, including in Asia.
But success in emerging markets won’t be enough to ensure its survival, according to Amit Kaminer, a telecom analyst with the Seaboard Group.
“Nokia learned that pretty well,” Kaminer said. “They’re now more humble.”
After a few years of “resting on their laurels,” RIM is finally is finally “past the denial period” and is moving to save itself, he said, but added it may be too late.
“If we were in the ER, the patient would be in critical condition. The next few months will be crucial.”
Blackberry PlayBook Flops, Prices Slashed
The PlayBook tablet, which was the BlackBerry maker's answer to the iPad, went on sale in April 2011. Since then, <a href="http://www.huffingtonpost.com/2012/01/03/blackberry-playbook-price-rim_n_1181167.html" target="_hplink">RIM has lost $485 million</a> on unsold units. At the beginning of January, <a href="http://www.huffingtonpost.com/2012/01/03/blackberry-playbook-price-rim_n_1181167.html" target="_hplink">RIM slashed the price of all models</a> of its tablet to $299. The special pricing will last until February 4. PlayBooks, which come in 16, 32 and 64 gigabyte models, typically retail for $499, $599 and $699, respectively, <a href="http://news.cnet.com/8301-1001_3-57351162-92/blackberry-playbook-price-now-$299-for-all-models/" target="_hplink">according to CNET</a>. In November, RIM temporarily <a href="http://www.huffingtonpost.com/2011/11/22/blackberry-playbook-price-drop_n_1107941.html" target="_hplink">slashed the price</a> of the 16GB version of the tablet to $199 at certain retail locations.
In October, BlackBerry <a href="http://www.huffingtonpost.com/2011/10/13/blackberry-outage-2011-rim-says-services-returning_n_1008596.html" target="_hplink">suffered an outage that affected</a> many of its then 70-million worldwide users, leaving some of its customers in Asia, Europe, Latin American and Africa without service for as many as three days. Some users in the U.S. were affected, but not for as long a period.
Drunk Execs Disrupt International Flight
In December, two RIM executives were fired after a flight they were on was forced to be diverted because the pair's "drunken rowdiness," <a href="http://www.huffingtonpost.com/2011/12/02/two-men-face-hefty-fine-a_0_n_1125214.html" target="_hplink">the AP reports</a>.
BlackBerry 10 Platform Delayed
Research in Motion announced in December 2011 that its highly anticipated BlackBerry 10 platform won't be available until the end of 2012. <a href="http://www.huffingtonpost.com/2011/12/16/blackberry-10-phones-rim_n_1153314.html" target="_hplink">According to the AP</a>, the company claims the holdup is because the chipset needed for the phones running the platform won't be available until the middle of this year.
Stock Slides In 2011
In 2011, <a href="http://www.dailyfinance.com/quote/nasdaq/research-in-motion-limited-usa/rimm" target="_hplink">RIM's stock</a> dropped <a href="http://www.huffingtonpost.com/2012/01/23/rim-ceos-jim-balsillie-mike-lazaridis_n_1222605.html#s629929&title=Lessien" target="_hplink">a massive 75 percent</a>.
Falling U.S. Market Share
In less than a year, RIM's share of the U.S. smartphone market <a href="http://www.huffingtonpost.com/2012/01/23/rim-ceos-jim-balsillie-mike-lazaridis_n_1222605.html#s629929&title=Lessien" target="_hplink">dropped by almost 50 percent</a>, from <a href="http://www.comscore.com/Press_Events/Press_Releases/2011/3/comScore_Reports_January_2011_U.S._Mobile_Subscriber_Market_Share" target="_hplink">30.4 percent</a> in January 2011 to <a href="http://www.comscore.com/Press_Events/Press_Releases/2011/12/comScore_Reports_November_2011_U.S._Mobile_Subscriber_Market_Share" target="_hplink">16.6 percent</a> in November 2011. In 2009, <a href="http://www.huffingtonpost.com/2011/12/16/blackberry-10-phones-rim_n_1153314.html" target="_hplink">RIM controlled 44 percent</a> of the US smartphone market. (Pictured above is the HTC Desire HD Android, which runs on Google's much more popular Android platform.)
Investors Urge Company Sell Itself
A nearly 75 percent drop in stock price in 2011 did not please investors. At the end of 2011, Jaguar Financial Corp, <a href="http://www.huffingtonpost.ca/2012/01/03/balsillie-lazaridis-rim-research-in-motion-jaguar-financial_n_1180885.html" target="_hplink">one of the largest investors</a> in RIM, called "for substantial corporate governance change and for a sale of RIM, whether as a whole or as separate parts." Vic Alboini, the chief executive of Jaguar Financial, <a href="http://www.bbc.co.uk/news/business-16393180" target="_hplink">told the BBC earlier this month</a> that RIM has "lost it." "The party is over, we believe, in terms of trying to design that cool, tech savvy smartphone," he said. "Microsoft has over $50 billion in cash, RIM has $1.5 billion. There is no way they'll be able to compete."
The family of 11-year-old Kian McCreath of Coventry, U.K., gave RIM some of its worst publicity in 2012, telling the media the boy was burned and left with permanent scarring when his BlackBerry Curve 9320 exploded. Although cell phones that are left to charge too long are known to explode, for RIM the news represented a horrible publicity disaster that came just weeks ahead of the launch of its BlackBerry 10.
A FIRST LOOK AT THE BLACKBERRY 10
BlackBerry 10 First Look
In email, when you select a message, it swoops in from the side.
BlackBerry 10 Preview
A look at the "Glance" view on attachments in email.
BlackBerry 10 Preview
A look at the new touchscreen keyboard, with predictions of what word you are going to type next. Hold down the letter and swipe up briefly to choose that word.
BlackBerry 10 Preview
Another look at the predictive keyboard.
BlackBerry 10 Preview
The phone call screen. Swipe up to dismiss, down to answer.
BlackBerry 10 Preview
The phone call screen.