RIM hopes that trimming the fat will boost its enterprise strategy. Sophie Curtis says the changes must go to the top of the company
BlackBerry maker Research In Motion dropped a bombshell this week, announcing that 2,000 members of staff would lose their jobs. The company hopes that the mass redundancies will give it the financial boost it needs to rejuvenate its enterprise business, which has been floundering in the face of growing competition from Android and Apple.
In its June earnings report, RIM revealed that its first quarter revenues were down 12 percent from the previous quarter to $4.9 billion (£3bn). Net income was also down. RIM downgraded its revenues forecasts, causing its shares to drop 60 percent from their year high.
The company described the latest redundancies as a “Cost Optimisation Program,” claiming that cuts were a “prudent and necessary step for the long term success of the company”.
A management problem?
This is in spite of reports that RIM has been attracting new customers, and that its 7-inch BlackBerry PlayBook tablet shipped approximately 500,000 units in the first quarter. During the first quarter RIM also sold approximately 13.2 million BlackBerry handsets.
IDC analyst Ramon Llamas expects the layoffs to do the company more harm than good. “Those 2,000 jobs, where’s that going to come from? Engineers? Sales? RIM’s had its work cut out to stay competitive, and now the layoffs, which are not a small number,” said Llamas in an interview.
However, analyst Jack Gold of J.Gold Associates told Computerworld that the 10 percent reduction would “let them run a leaner ship and hopefully get products to market quicker with fewer groups and layers of management to get in the way”.
Confidence in the company has been flagging for some time, largely because of its unconventional governance structure. The company’s two bosses, Jim Balsillie and Mike Lazaridis recently came under a blistering attack from an unnamed but reportedly senior RIM employee, who lamented the “chaos” within RIM, which had placed the BlackBerry two years behind the iPhone.
The open letter called on Balsillie and Lazaridis to lay off unproductive workers while considering stepping aside themselves. “We are in the middle of a major ‘transition’ and things have never been more chaotic,” the letter said.
The letter also called on executives to reduce RIM’s product line and to “stop shipping incomplete products that aren’t ready for the end user.”
RIM acknowledged the difficulties, but insisted that there is much excitement and optimism about the new products that are lined up for the coming months. Rumours have indeed been circulating today that RIM is about to take the wraps off new devices running its latest operating system, BlackBerry 7.
Major makeover needed
However, new products won’t solve the fundamental problem at the heart of all this – that there are simply too many cooks in RIM’s kitchen, and they are spoiling the broth. Some RIM shareholders are now reportedly calling for the roles of the co-CEOs to be better defined, and the company has appointed a committee of independent directors to propose a new leadership structure.
The company’s recent mistakes – such as shipping its PlayBook tablet late and without native email – could undoubtedly be blamed on poor group execution. But in my view, the company’s sluggish development of new products indicates a lack of vision at executive level.
RIM needs fresh blood, fast. Maybe laying off a portion of the workforce will help to trim the fat and open up new opportunities for new bright sparks – and it is conceivable that will be enough to propel the company back onto a level playing field with Apple and Google.
However, what RIM really needs is a top-down makeover, that will help it to throw off its fuddy-duddy image and appeal once again to a young, tech-savvy, fashion-conscious enterprise market. And that, I’m afraid to say, means the cuts will have to come higher up the ladder.