RIM To Cut 5,000 And Delay BlackBerry 10 After Huge Loss

Troubled BlackBerry maker Research In Motion (RIM), which is under intense pressure from its Apple and Android smartphone rivals, has announced it will delay the launch of smartphones running its upcoming BlackBerry 10 platform.

The delay is part of a widening eddy of bad news that is threatening to take the company under, mixing in with a $518 million (£333m) loss in the past fiscal quarter and further restructuring that will include cutting 5,000 jobs.

Tightrope Walk

All of this was laid out 28 June by RIM CEO Thorsten Heins on a conference call with analysts and journalists talking about the weak fiscal first-quarter financial results for the battered company.

Heins walked a precarious path during the talk, touting the features expected when the BlackBerry 10 devices are finally released sometime early next year and the hopes tied to the restructuring effort while at the same time recognising the RIM’s continuing financial struggles and the need to rapidly pare costs, including slashing almost a third of its 16,500-strong workforce.

“This was a challenging quarter for the company on many fronts,” he said at the beginning of the call. “I am not satisfied with the financial performance we are reporting today.”

RIM, which once dominated the enterprise mobile device space, has found itself under increasingly greater pressure over the past several years, thanks in large part to the rapidly rising popularity of Apple’s iPhone and the myriad devices on the market running Google’s Android mobile operating system. It’s also been hampered by execution problems within the company – the newly announced delay in the released of BlackBerry 10 devices was not the first.

Dire Financials

In the days leading up to the announcement of the quarterly numbers, analysts had expected poor results, and that is what they got. Revenues came in at $2.8 billion (£1.8bn), a 43 percent drop from the $4.9 billion (£3.5bn) during the same period in 2011, and the net loss has continued to grow, from $125 million (£80m) the previous quarter to $518 million (£333m). During the same quarter last year, RIM earned $695 million (£447m).

The company shipped 7.8 million BlackBerry smartphones during the quarter, a 41 percent drop from the 13.2 million a year ago. The drastic drop also was seen in its global market share, according to IDC analysts. In the first three months of the year, RIM’s share of the smartphone market was 6.4 percent, less than half of the 13.6 percent in the first quarter of 2011, according to IDC numbers.

In their report in May, IDC analysts said RIM was hampered by users awaiting the release of the BlackBerry 10 devices and by the fact that more enterprises are letting employees bring their own devices into the work environment, enabling iPhone and Android devices to eat into BlackBerry’s domain.

BlackBerry 10 Delay

While the numbers were poor, as anticipated, the delay in the BlackBerry 10 devices was an unexpected setback.

Heins, who was appointed CEO in January, has been saying for months that the new devices would determine the company’s future, and that it was crucial to get them onto the market in time for the all-important holiday shopping season. However, while touting the strength of the platform, Heins said that RIM engineers were still working to integrate key features into the devices, and that creating the software code for BlackBerry 10 was taking more time than expected.

Heins admitted the problems with having to push back the release time for the devices, but said it was more important for RIM to ensure the BlackBerry 10 devices were completely ready to go rather than trying to rush unprepared smartphones onto the market.

”I will not compromise the product by delivering it before it is ready,” he said. “We’re not just building a new product. We’re building a whole new mobile platform.”

Heins pushed back at questions about whether by early 2013, the various features in BlackBerry 10 will already be outdated and overtaken by the myriad new platforms from rivals, including Apple’s iOS 6, Android 4.1 Jelly Bean and Microsoft’s Windows 8, saying he was confident the features in the new BlackBerry platform will compare well against the competition.

Job Cuts

One analyst asked him whether what RIM was doing – trying to create a new ecosystem and new community – was too little too late, comparing its efforts to those of Nokia with Windows. The analysts suggested that RIM might be better off dumping its own operating system and embracing Android instead.

“We’re not trying to be one of many,” Heins said. “We’re trying to be different. … We expect to be a viable, successful mobile platform for the future.”

That will have to happen at the same time RIM aggressively pares back the company. The 5,000 job cuts – which will happen over the next three fiscal quarters, and will cost the company about $350 million (£225m) in charges – are part of  larger effort to slash costs by $1 billion (£644m).

“It is necessary to change the scale and refocus the company,” Heins said, adding that he understood how the job cuts would impact employees. “I assure you that we wouldn’t move forward with a change of this size if we didn’t think it was critical for our future.”

Part of the restructuring also means making changes to how the company operates, he said. RIM will continue focusing on the consumer and enterprise markets, and look to leverage where those markets meet, in such trends as bring-your-own-device. The company also will trim the number of devices its sells, using BlackBerry 10 for premium smartphones and continuing with BlackBerry 7 for entry-level devices.

RIM also will ramp up efforts to grow its customer base beyond the current 78 million, Heins said.

At the same time, he also reiterated that RIM is working with banks, including JP Morgan, to help company executives determine their options going forward.

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Jeffrey Burt

Jeffrey Burt is a senior editor for eWEEK and contributor to TechWeekEurope

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