When a company plans layoffs on top of yet another quarter of operating losses, it raises questions about whether there is any meat left on the bone. The troubles at Research In Motion (Nasdaq: RIMM), the maker of BlackBerry devices, are well chronicled. Its shares have lost about three-quarters of their value, falling to $9.66 midday yesterday (the lowest price since Dec. 22, 2003) from a 52-week high of $39.86.
As the battle between the iPhone and Android-based smartphones intensifies, BlackBerry devices have fallen in popularity. Last week, RIM gave a business update in advance of its fiscal first-quarter results, which are expected to be released this month. The outlook wasn't pretty.
Though RIM tried to tout its forthcoming BlackBerry 10 software platform, CEO Thorsten Heins could not escape the fact that his company plans to lay off employees the rest of its fiscal year. RIM expects to report an operating loss for the quarter that ended June 2.
It would not say how many people would be laid off or how it would make the cuts. Uncorroborated speculation says 5,000 to 6,000 people could lose their jobs. RIM had a staff of 16,500 as of March.
Based on previous statements by Heins, the company has not ruled out a sale. However, anyone thinking of snatching up RIM, whether whole or in pieces, faces a tough challenge trying to revive its place in mobile communications.
Robert Rosenberg, president of the telecom market research firm Insight Research Corp., told me that RIM will remain on a downward slope “unless there’s something magical that their scientists can work up that will blow everyone else off the table.” The growing momentum for open architecture with the Android platform will let many other device makers grab more marketshare. “That’s the future,” he said. “I think it will even overwhelm Apple’s current position. I may be in the minority in that.”
Open platforms such as Android make devices more accessible, Rosenberg said. “That wasn't RIM’s strategy, and to a lesser extent, it really isn't Apple’s strategy.” Furthermore, the explosion of the tablet market, where RIM stumbled hard with the PlayBook, offers consumers and business users even more access to multimedia on portable devices. “We want to see each other in real-time and get the news wherever we are.”
Putting technology in the hands of business users before consumers was the old strategy for North American device makers. Yet even though business and government users rely on BlackBerry’s email technology, Rosenberg said Apple Inc. (Nasdaq: AAPL) changed the game by luring in the masses with multimedia communications, not just text.
Though Research In Motion was an early leader in mobile communications among business users, the company has been trumped on the innovation front. It has “an embedded base of business customers, but there is no reason why those people will not migrate for a lower cost and greater functionality to competitors.”
What happened to RIM is a sad story. They were early to the mobile party but lost their edge. I think it might be best for them to be sold. They do have a strong business base who still likes the idea of business email. They also have very good security technology which could be used by other players in the market. It would be interesting to see their software technology combined with Android. That would make Android phones more business friendly.
RIM is a sad story, but also a cautionary tale. Corporate IT departments may have started out as RIM's market, but that wasn't enough when consumers were given the choice.
If RIM were to take its positioning "ultra secure" and B2B though, I'll bet they could find governments willing to bite. Such as our own. Why dollars to donuts, the 2020 Census is putting out RFPs right now to build the next-generation, useless dinosaur device to waste our tax dollars.
The story of RIM is in fact a sad one, but I would say that even a sale would not save them. Right now they only value they really have to offer up for sale is their patent library, once that is snached up there is no reason to really keep the doors open at the failing company.
It was just 5 years ago that blackberry phones were on the top of many lists, today they are only slightly more than paper weights.
Shelly Palmer, a tech reporter and blogger, had an interesting piece on the End of the Blackberry recently. It notes: "I very rarely call the "time of death" of a company. It's really not my place. But, after my customer service experience with RIM (Research In Motion, the makers of BlackBerry smart devices) the other day, I think it's safe to say that BlackBerry has passed on! RIM is no more! It has ceased to be! It's expired and gone to meet its maker! It's a stiff! ...All kidding aside, I had a 53 minute call with RIM's customer service/tech support departments that was so remarkably annoying, that I am sure there is no hope for the company or its products."
Do you agree? Can a tech company that stops providing decent customer service survive?
I don't think they can. Support is a major part of a product like BB. It would probably have been their only saving grace given that innovation and service went out the window a few years back.
Noreen, If a company like RIM has consistently bad customer service, then I think they are doomed. This is especially true in the business market since these customers will complain long and hard if they do not get good service. Most companies also have contracts that cover how support is suppose to work for them - so there may be penalties if there are ongoing issues here.
I see that falling off. more and more companies are moving away from BB for corp email. Many are moving to a BYOD model as well. I have seen this move within my own company, which was strongly invested in BB as well as others.
Two years ago I might have thought that they that was a selling point, but today I think its too late.
The failure of customer service to address the problem Shelly Palmer noted in his post is, in fact, the sign that the end is near. There was a time when RIM was all about solutions and answers. Now it's just part of the problem.
I agree Tenacious. I really thought RIM was going to make a comeback and I was really looking forward to Blackberry 10. But it looks like, as you stated, that won't be enough to salvage the brand.
Do you think RIM would have fared better by remaining focused on its core customers instead of trying to compete with Apple and other smartphone makers? In other words, would its serious phone platform have differentiated it enough to keep it viable with a loyal albeit limited customer base?
Some people think RIM has a shred of hope if it could open up its development platform to become the most opensourced phonemaker. But I still think the time has passed.
@Tenacious. Even RIMM focused only on its enterprise business, totally avoided the consumer business, it won't save its life. Yeah, RIMM will be in better shape now, at least financially, but in the long run, it will still lose.
Actually between 2009-2011, Nokia adopted the strategy by focusing on low end phone market in developing countries. It worked for several quarters, but at the end, Nokia still lost the low to middle end market.
In technical world, winners take all. Playing Ostrich only give you a false sense of security.
Image may not be EVERYTHING but it is SOMETHING! Let's remember the "cool" factor...or in RIM's case, the lack thereof. In this world where personal branding reigns supreme and people buy Apple products even though they AREN'T better, what does it say about you to be buying a new Blackberry???
From investors point of view, I'd rather agree on Tenacious' suggestion "RIMM shall focus on enterprise business, and cut off its consumer devision to save cost". The strategy may even not save RIMM, but it will gain some time for RIMM for even a better sale.
RIM was once Canada's most valuable company, with a market value of $83-billion in June 2008, but the stock has plummeted, from over $140 a share to around $10.
And its US share of the smartphone market belly-flopped from 44% in 2009 to 10% in 2011, according to market researcher NPD Group.
Do you think RIM would have fared better by remaining focused on its core customers instead of trying to compete with Apple and other smartphone makers?
@Tenacious, I dont think it would have helped much. I think the only option that RIM had was to make android apps compatible to RIM so that people who wanted android OS could have bought RIM handsets.
Nokia's Windows Mobile phone turned heads (to some extent) at CES in January and this particular line of phones has not been on the market that long. I've written elsewhere about Nokia and Microsoft trying to coax app developers to populate this platform. I don't have any sales numbers in front of me but in short it's difficult to lure the public away from the iPhone vs. Android choice.
Talking with Bob Rosenberg, he tends to emphasize the software/apps as the backbone of what people are after. The hardware, while necessary to deliver the apps, can be somewhat secondary if the software doesn't excite people.
I think it also may be too late for RIM. But what if they concentrated on having the most/best business applications? Is there a space for a business smartphone?
I don't think a case can be made at this point, with everything really being driven by app development not hardware development it seems RIM missed the boat and are now too far behind the curve to catch up.
I really thought that RIM was going to make a comeback. After the fiasco last year (or was it earlier this year) with all of their service being down, and them awardiing customers with horrible "door prizes" in the form of useless apps("Bubble Bash 2" serioulsy RIM...seriously?!?), I though they would right the ship and make a roaring comeback with the BB 10. But alas, to no avail, my faith has been shattered, and it looks like I am going to have to switch over all of my devices to Android-based technology. I have a BB Torch (business) and an HTC Inspire 4G (personal) and the Android phone far outpaces my BB.
During the past five years, we saw the rollercoast ride of hightech companies in the mobile industry: Apple, Motorola, Nokia, HTC, Samsung, and of course RIMM. I slowly realize why Mr. Buffet dislikes the idea of investing in high tech industry.
Five years ago, Apple just started to learn how to build a cell phone (Remember the failed Moto ROCK?), Samsung was such a small player, that nobody paid attention to it. The mobile industry was ruled by old stalwarts like Nokia, Motorola, Sony-Ericsson, and new kids in the playground like RIMM, Palm, etc.
In 2007, Apple shook the whole industry with the iPhone, and two year later, Google cooperated with Motorola to release the first Android phone (Yeh, I knew HTC is the First kid in the Android playground, but it made little splash in the market).
Fast forward to current time, the mobile phone industry was dominated by two guys, Apple and Samsung (aided by Android). Other players are either dead (Palm) or dying (RIMM and Nokia) , or just surviviing (HTC, Motorola, etc)
If either Nokia or RIMM adopted Android in 2009, they had the potential of being at the position of today's Samsung in either consumer or enterprise market. But history does not take assumption. It is too late for both companies to do anything now
The moral of the whole story: it is hard to find a hightech company with a durable moat. Investors with long term goal shall be very careful to put money in high tech field unless you are Philip Fisher, or Claude Shannon.
As much as I hate to see a company fail, I hate it even more when a company gets complacent and expects to have customers forever without offering them any improvements or incentives to stay.
As sales continue to decline, the more worrying trend is that the mesaging service is also declining. Many feel that the number of users is getting close to goimng below critical mass. This is one of the key values fo the company if it is to be acquired. Loss of this asset will speed the decline.
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