NEWS
06/21/2011 05:11 EDT | Updated 08/21/2011 05:12 EDT

Research In Motion Layoffs Rumoured

AP

THE CANADIAN PRESS -- MONTREAL - Research In Motion is moving to cut costs by laying off a reported 200 employees in its hometown, as the BlackBerry maker works to stay competitive by transitioning to a new line of smartphones, say analysts.

The Waterloo, Ont.-based company declined to confirm the number of layoffs on Tuesday, but the move falls in line with its recently announced plan to reduce its employee count.

"It signals that the company must rein in their costs," Edward Jones technology analyst Bill Kreher said Tuesday.

"If the company is going to see lighter BlackBerry shipments going forward, then they need to adjust the cost structure accordingly," Kreher said from St. Louis, Mo.

RIM will have an updated BlackBerry Bold and Torch out in later summer, acknowledging it will miss a big part of the back-to-school selling season. A new generation of BlackBerry smartphones with the same operating system as the PlayBook tablet won't be out until early 2012.

In the interim, the BlackBerry maker has mostly an aging lineup of BlackBerrys to sell in a market that is focused on innovation and new marketing hooks.

A public relations firm representing the Waterloo, Ont.-based tech company said Tuesday it did not have details beyond the initial job cuts announcement last week during RIM's quarterly conference call. That announcement didn't give specifics.

Last Thursday, co-CEO Jim Balsillie -- notorious for keeping a shroud of mystery around the company's challenges -- confirmed that job cuts were in the pipeline, but declined to specify how many there would be or when they would take place. However, he did say they won't be in areas that are critical to the company's growth.

The recent turbulence at RIM's headquarters is far from the enthusiastic growth that the company experienced a few years ago, even amid the economic downturn when other companies were remaining low profile and spending conservatively.

In 2009, RIM (TSX:RIM) announced plans to add several thousand new workers to its payroll, and now has about 17,000 employees across its operations.

But since then, the company has contended with the emergence of Apple's iPhone and smartphones with Google's Android operating system and has lost share in the important U.S. market. RIM's PlayBook tablet, which met expectations of selling 500,000 in the recent quarter, has received lukewarm reviews compared with Apple's iPad.

Kreher said he doesn't see much future growth for RIM.

"We simply lack confidence that RIM has long-term viability in the smartphone category. With that being the case, we lowered our long-term earnings forecast to zero per cent. We see little to no growth going forward for this company."

Kreher said he "lacks faith" that RIM's management will be able to successfully transition to new phones with the more powerful QNX operating system that's now in the PlayBook.

"This is given management's inability to execute on previous product launches and a strong tendency to over promise and under deliver."

Shares in Research In Motion closed up $2.33, or nine per cent, to $27.74 on the Toronto Stock Exchange Tuesday after the BlackBerry maker took a major hit on the market last week.

The strength was likely fuelled by the job cuts and takeover rumours that have captivated the market in recent sessions.

RIM shares have fallen nearly 26 per cent since Friday -- the first session after the cost cutting plan was announced, which contributed to a rash of analyst pessimism about the company's prospects.

Its current value on the markets makes its a particularly attractive target for a larger company to take over, some analysts suggest. But not all agree.

"We recognize that RIM has certain assets that may be valuable. We have a difficult time seeing a large IT conglomerate purchasing them only for select assets," Kreher said.

"Given the deteriorating brand of Blackberry, we would put the probability at very low."

But MKM Partners analyst Tero Kuittinen said Asian companies such as Lenovo may be interested in buying RIM.

"Many of them have been unable to craft a credible smartphone strategy," said Kuittinen, whose firm is based in Stamford, Conn.

Kuittinen said the job cuts signal to Wall Street that RIM wants to conserve cash.

"They want to convince people that they are not going to start burning cash even if they're going through a rough period. That's what they really want to make sure that Wall Street knows."

Software applications have been another challenge for RIM. They can do everything from allowing people to play games to check the weather on their smartphones and are driving features of the iPhone and Android devices.

Saju Thomas, product manager for the location-based recommendation service Picksie.com, said consumers want "apps" and a number of large software application developers aren't bothering anymore with apps for RIM.

"Obviously developers won't come until consumers are there," he said from Jersey City, N.J. "Consumers won't come until there are enough apps. So it's a bit of a catch."

By LuAnn LaSalle, the Canadian Press