Struggling BlackBerry maker RIM won’t get a bailout from Canada's federal government, Finance Minister Jim Flaherty has said.
Waterloo, Ontario-based Research In Motion “has been a leading company for Canada in terms of research, development and innovation, but it does need to reorganize itself, and that’s something that we expect the leaders in the company to do on their own,” Flaherty said Wednesday, as quoted by Bloomberg.
As the Globe and Mail’s Michael Babad points out, that’s a different approach than what the Conservative government took when it bailed out Canada’s automotive sector in 2009. Ottawa and the Ontario government gave the sector $10.5 billion to keep factories from closing in the wake of the financial crisis.
Bloomberg reports that Flaherty wouldn’t comment on the possibility of a foreign takeover of the high-tech company, but Prime Minister Stephen Harper has suggested in the past he would like to see the company stay in Canadian hands. (Harper’s comments were criticized by analysts who said they would make it harder for RIM to find a buyer.)
RIM has struggled with shrinking sales as consumers have shifted steadily to Android phones and Apple’s iPhone in recent years.
Most recently, the company announced it is expecting to record a loss for the first quarter of fiscal 2012. Although its profit margins had been shrinking, the company had so far managed to largely avoid swinging to a loss.
RIM also said it had hired banks JPMorgan and RBC to help it with a strategic, prompting yet another round of rumours that it’s looking to be bought out. That was seen by many analysts as a step towards finding a buyer or at least developing major new partnerships that would allow the company to keep operating.
The company is expected to lay off 2,000 to 6,000 workers in the coming months, following the layoffs of 2,000 people last summer and amid continuing weekly layoffs taking place the company.
Market Share Eroding
RIM experienced trouble competing in the U.S. smartphone market in early 2011 and <a href="http://www.huffingtonpost.com/2011/06/03/rim-market-share_n_871129.html?ir=Canada" target="_hplink">dropped from second place to third</a>, as Google's Android and Apple's iPhone gathered steam. The company's shares decreased 40 per cent in value since February,<a href="http://www.huffingtonpost.com/2011/06/03/rim-market-share_n_871129.html?ir=Canada" target="_hplink"> Reuters reported in June</a>.
When facing leaner times in July, the struggling tech company <a href="http://www.huffingtonpost.ca/2011/07/25/rim-to-cut-2000-jobs_n_908392.html" target="_hplink">announced its plan to cut 11 per cent of its workforce</a>, or about 2,000 employees, in an attempt to scale back.
To add insult to injury, millions of BlackBerry users around the world <a href="http://www.huffingtonpost.com/2011/10/12/blackberry-outage-rim_n_1006691.html?ir=Canada" target="_hplink">experienced network outages</a>, resulting in messaging and browsing delays in October 2011. Co-CEO Mike Lazaridis <a href="http://www.huffingtonpost.ca/2011/10/13/rim-blackberry-outage_n_1008424.html" target="_hplink">posted an apology to YouTube</a> promising improvements to the system.
Following disappointing PlayBook sales resulting in <a href="http://www.huffingtonpost.ca/2011/12/02/rim-playbook-485-million-charge_n_1125380.html" target="_hplink">huge profit losses</a>, RIM <a href="http://www.huffingtonpost.com/2011/11/28/blackberry-playbook-best-buy_n_1116532.html?ir=Canada" target="_hplink">slashed its tablet prices down to $199</a>, which prompted a major pre-Christmas rush. However, customers became outraged when Best Buy, unable to keep up with demand, <a href="http://www.huffingtonpost.com/2011/11/28/blackberry-playbook-best-buy_n_1116532.html?ir=Canada" target="_hplink">reportedly cancelled existing orders and removed the PlayBook from its website</a> when it ran out of stock. In early January, RIM <a href="http://www.huffingtonpost.com/2012/01/03/blackberry-playbook-price-rim_n_1181167.html?ir=Canada" target="_hplink">put its struggling PlayBook tablet on sale</a> again in the U.S. for $299.
Mere days before RIM named Thorsten Heins as its new CEO, Samsung <a href="http://www.huffingtonpost.com/2012/01/17/samsung-rim-buyout_n_1210958.html?ir=Canada" target="_hplink">denied rumours</a> that it planned to purchase RIM or license its operating system, causing RIM shares to dip.
May was not a kind month to RIM. Soon after the<a href="http://www.huffingtonpost.ca/2012/05/28/karima-bawa-research-in-motion_n_1550984.html" target="_hplink"> departure of the company's chief legal officer</a>, Karima Bawa, the company announced that it would hiring two financial firms to advise on the company's financial performance.
If the announcement of the necessary outside help wasn't bad enough, numerous reports surfaced regarding RIM's massive layoffs during the end of May. The cuts were estimated at laying off <a href="http://www.ottawacitizen.com/business/layoffs+could+many+employees/6689699/story.html" target="_hplink">anywhere from 2000 - 6000 workers.</a>