Slumping RIM Explores Strategic Options - InformationWeek

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Mobile // Mobile Devices
10:33 AM
Eric Zeman
Eric Zeman

Slumping RIM Explores Strategic Options

RIM faces $1 billion inventory write-down, massive layoffs, and senior executive defections. Beleaguered smartphone maker hires bankers to analyze strategic options.

How IT Views RIM's Future: Exclusive Research
How IT Views RIM's Future: Exclusive Research
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The last seven days--never mind the last seven quarters--haven't been kind to Research In Motion. The company halted trading on its shares late Tuesday so it could issue an earnings warning while it continues its struggle to turn its fortunes around. If it wasn't clear already, RIM is in a lot of trouble.

Perhaps the most troubling aspect of RIM's current position is the unsold inventory of BlackBerries and Playbooks it has sitting in warehouses somewhere. The value of RIM's in-house supplies grew 18% during the last quarter. According to Bloomberg, the total value of those devices is about $1 billion. With little hope of moving the lot, RIM may take a $1 billion write-down on the value of the dust-gathering hardware. That will have a serious impact on the company's quarterly financials.

In late 2011, RIM took a similar hit when it wrote-down the value of unsold PlayBooks, totaling approximately $485 million.

Over the holiday weekend, RIM lost its top lawyer. Chief Legal Officer Karima Bawa is retiring from the company after 12 years. Just a few days before that, Patrick Spence, RIM's head of global sales also left the company.

[ RIM is facing many challenges. Read Android, iOS Crush BlackBerry Market Share. ]

Worse, the company is preparing to lay off thousands of workers, according to a report in The Globe and Mail. Over the weekend, the local Waterloo newspaper noted that RIM is set to trim its workforce by as many as 2,000 employees--or about 12% of its 16,500 workforce. The company held a similar round of layoffs last year.

On May 29, the company issued a stern warning about its performance during its first fiscal quarter.

"As I mentioned on the March financial results conference call, RIM is going through a significant transformation as we move towards the BlackBerry 10 launch, and our financial performance will continue to be challenging for the next few quarters," said CEO Thorsten Heins.

"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 [first quarter] results to reflect this, and likely result in an operating loss for the quarter. We are continuing to be aggressive as we compete for our customers' business--both enterprise and consumer---around the world, and our teams are working hard to provide cost-competitive, feature-rich solutions to our global customer base."

Heins detailed steps the company has taken during the quarter to help improve its position. That includes two new executive hires: Kristian Tear, chief operating officer, and Frank Boulben, chief marketing officer. Successes include growth in its global subscriber base to approximately 78 million; App World growth to more than 80,000 apps; steady progress with its BlackBerry 10 mobile computing platform; and developer enthusiasm for the BlackBerry 10 Dev Alpha prototype unit that was distributed at BlackBerry World early this month.

That's where the good news stops. RIM also said it has hired J.P. Morgan Securities and RBC Capital Markets to assist it with "reviewing RIM's business and financial performance." The advisors are being tasked with evaluating RIM's "relative merits and feasibility of various financial strategies, including opportunities to leverage the BlackBerry platform through partnerships, licensing opportunities, and strategic business model alternatives."

RIM's first quarter closes officially on June 2, and it expects to release the results June 28. At that point, we'll have a much better understanding of just how dire things may be.

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User Rank: Apprentice
6/4/2012 | 11:10:41 PM
re: Slumping RIM Explores Strategic Options
There sure are risks with BYOD although MDM tries to minimize them. That's a moot point here though Austin. RIM is in trouble because when users are given a choice most of them no longer elect to use a Blackberry. In fact if users still preferred Blackberries, the BYOD movement might not be picking up steam.

That loss of mindshare and user appeal is RIM's own fault. They had so many opportunities to get on the bandwagon. Google recognized the potential of the iPhone, particularly when iPhone 2 and the app store appeared. Look where they are today.

RIM, nibbled around the edges of being a smartphone, but they never really got it. They ruled the world at the time; easy to assume that momentum would carry them in the enterprise at least. So they let opportunity pass them by.

Heck, they could have acquired Palm; WebOS would have been much easier to build on than QNX. Or they could have joined the Android bandwagon.

Bottom line the war was theirs to lose; they gave up without a fight. Now it is probably too late.
User Rank: Apprentice
6/1/2012 | 6:34:07 PM
re: Slumping RIM Explores Strategic Options
lol that's a pretty darn good analogy.

I don't think RIM, let alone just about everyone else, ever dreamed that businesses would just throw down the guantlet - vis-a-vis the BYOD movement. It's pretty ridiculous for them to do so. Who's in control of "your" network anyway? You or your employees?
User Rank: Apprentice
5/31/2012 | 9:41:21 PM
re: Slumping RIM Explores Strategic Options
They concentrated on becoming the Rolex of smartphones then drowned in a deluge of Swatches, so to speak.
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