06/20/2012 10:30 EDT | Updated 08/20/2012 05:12 EDT

RIM Job Cuts: Shares Down As BlackBerry Maker Tries To Save $1 Billion


BlackBerry-maker Research in Motion Ltd. (TSX:RIM) has begun the grim task of cutting jobs in a bid to save $1 billion as part of a plan to right the company as it races to bring its new models to market later this year.

The company said Wednesday that it's looking for at least $1 billion in savings by the end of its 2013 financial year and job cuts are part of that plan.

"RIM has reduced some positions as part of this program and may continue to do so as the company methodically works through a review of the business," the company said in a statement.

RIM — which did not provide specific numbers regarding the cuts — is expected to provide a business update when it reports its first-quarter results on June 28.

Wedbush Securities analyst Scott Sutherland estimated that RIM could cut as many as 3,000 employees in its bid to reduce costs, which would top last year's cut of around 2,000.

"I think RIM is finally making the hard decisions," he said.

"It is a tough time for them, but they need to ensure profitability, speed to market, and get these new devices out."

Sutherland said much is riding on a new line of BlackBerry phones powered by the BlackBerry 10 operating system, which are expected later this year.

"I'm not sure it is going to be enough to tell you the truth. I think they need a much broader strategy change," Sutherland said.

"I think they need an ecosystem of devices and content applications and are just too far behind, unfortunately."

On Monday, contract electronics manufacturing company Celestica Inc. said it would be winding down its manufacturing services for RIM as the struggling BlackBerry maker tries to cut costs.

Celestica (TSX:CLS) said it would end manufacturing services for RIM over the next three to six months.

The job cuts had been widely anticipated since CEO Thorsten Heins announced last month that the company would reduce its staff by an unspecified number of jobs to save $1 billion.

Advance estimates on how many jobs would be lost ranged wildly from 2,000, or about 12 per cent of its workforce, to 5,000, or about 30 per cent.

Last July, RIM laid off about 11 per cent of its workforce, or 2,000 employees, marking the biggest employee reduction in its history.

Since then, the company has made significant changes in its executive ranks, including the exit of co-CEO Jim Balsillie and the reduction of the role played by co-founder Mike Lazaridis. Other lower ranking executives have also been replaced.

RIM has been working to turn around operations after watching its market share eroded by the growing popularity of Apple's iPhone and smartphones running Google's Android operating system.

The company hopes the debut of its BlackBerry 10 operating system and a new line of BlackBerry smartphones will help keep its subscribers from defecting to other devices, particularly in the United States.

However, speculation has been growing that RIM's efforts are too little too late, and that the BlackBerry maker could ultimately be sold off. In late May, the company said it had hired J.P. Morgan Securities LLC and RBC Capital Markets to evaluate various strategies, including potential partnerships and licensing.

In addition to its main base in Waterloo, Ont., RIM also has a customer service centre in Halifax that services users in Canada, the U.S. and South America.

Other smaller offices are based in Mississauga, Ont. and Ottawa where they have been combined with staff of QNX Software Systems, the company that designed the operating system behind the PlayBook and the next generation of BlackBerry devices.

Outside of Canada, RIM has operations in various places including Texas and the United Kingdom.

RIM shares closed down 47 cents at $10.49 on the Toronto Stock Exchange on Wednesday.

— with additional reporting by David Friend in Toronto

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