With no new handsets in eight months and recent news of declining profits and staff redundancies, Paul Withers asks the channel just what has gone wrong at RIM
BlackBerry manufacturer Research In Motion (RIM) became dominant in the business market through its then-groundbreaking push email capabilities.
The manufacturer also took a slice of the consumer market with colour variants and its popular BlackBerry Messenger services. Staff have even made statements suggesting RIM wants a 50/50 split between the two channels.
The company has a history of enviable financial successes, and increased sales revenue from £184 million in 2002 to almost £10 billion in 2010.
But recent news from the Canadian company suggests its momentum is beginning to slow. Stories of unrest among staff followed its announcement redundancies would be made to its 17,500-plus head-count – although it remains unclear how many employees will be affected.
On June 17, the company released its Q1 financial results for the quarter ending May 28. Compared with its previous, they don’t make positive reading.
Profits fell 9.5 per cent year-on-year from £481 million to £435 million. Revenues for the quarter were down 12 per cent from £3.43 billion to £3.06 billion compared to the previous three-month period, although they were up 16 per cent from £2.62 billion compared to the same period a year ago. However, Wall Street analysts had been predicting revenues of about £3.2 billion.
And since June 2008 to June 2011, RIM’s shareholders lost about £43.7 billion, representing the biggest decline among communications-equipment providers.
Slow to market
As a result RIM has downgraded its Q2 forecasts, estimating revenues at between £2.62 billion and £3 billion – well below analyst expectations of around £3.41 billion.
RIM is at least facing up to the disappointment. Co-CEO Jim Balsillie was honest in his assessment, admitting the company is not being quick enough in releasing new products to market, the defining factor in lowering forecasts for the second quarter.
This is one of RIM’s biggest issues, as agreed by the panel we questioned about the manufacturer’s predicament.
The last handset to be released was the Bold 9780, but that went on sale as far back as last November. Eight months without a new handset to market is a very long time, especially when you consider rivals such as Samsung, HTC and Sony Ericsson are all strengthening their portfolio across various market segments.
The much-delayed BlackBerry PlayBook finally went on sale in the UK on June 16, and many of our panellists think RIM might have taken its eye off its core handset portfolio, and instead put most of its efforts into getting the PlayBook right. Some also think this distraction is proving costly as the PlayBook won’t sell beyond the BlackBerry fan-base.
However, there is also an argument that this is a transition period for the company. Its new operating platform QNX debuts on the PlayBook, and will gradually be phased into its newer handsets, although the full benefits of that aren’t expected to be seen until midway through next year.
Good news also followed on June 21, when RIM’s shares jumped $2.66, or 10.3 per cent, to $28.55 on Nasdaq, bouncing back somewhat from a 27 per cent slide following the announcement of its dismal financial results. The reason for this were rumours circulating that the company may in fact be bought.
Many questions remain, though. Is this really a transitional period for RIM and if so, is it big and strong enough to sit back and continue as it is? Or is it time for the company to reinvent itself, to combat the risk of its loyal customer base becoming tired of the same form-factors on its smartphones? Should it make the move away from QWERTY keyboards and make a long-term move to touchscreen smartphones? Is BBM enough to hold its share in the consumer market? Our panel gives its view.
Full article in Mobile News issue 493 (July 4, 2011).
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