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.”