CEO and chairman says manufacturer is likely to make an operating loss in Q1, with significant cost and headcount reductions in the coming months
Research In Motion (RIM) has said it expects to report an operating loss in its Q1 2012 results, and added there will be significant spending and headcount reductions throughout the remainder of its financial year.
RIM CEO and president Thorsten Heins (pictured) provided a business update before the handset manufacturer’s quarter ends on June 2. These results will be released on June 28.
Heins said: “RIM is going through a significant transformation as we move towards the BlackBerry 10 launch, and our financial performance will continue to be challenging for the next few quarters.
“The ongoing competitive environment is impacting our business in the form of lower volumes and highly competitive pricing dynamics in the marketplace, and we expect our Q1 results to reflect this, and likely result in an operating loss in the quarter.”
Earlier this week a report in Canadian newspaper Globe and Mail, which cited a number of unnamed sources close to RIM, said it will cut at least 2,000 jobs from its global workforce of 16,5000 employees as part of a major restructure.
Heins said that although there will be significant spending cuts and job losses in some areas of the business, the company will continue to invest in areas associated with the launch of its BlackBerry 10 platform later this year.
“We will continue to review RIM’s organisational structure and clearly define accountabilities for all key businesses and business processes with a goal of eliminating fragmentation, duplication and efficiencies.
“While there will be significant spending and headcount reductions in some areas throughout the remainder of the fiscal year, we will continue to spend and hire in key areas such as those associated with the launch of BlackBerry 10, and those tied to the growth of our application developer community.”
RIM also revealed that after the release of its year-end financial results, it engaged with J.P. Morgan Securities and RBC Capital Markets to assist the manufacturer and its board of directors in reviewing its business and financial performance.
Heins said the duo’s responsibilities are to evaluate the relative merits and feasibility of various financial strategies, including opportunities to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives.
The CEO and president did however reveal that RIM’s global subscriber base continued to grow in the quarter to around 78 million, driven mainly by growth in international markets, which is partially offset by high churn in the US. Its BBM user base has grown to around 56 million users globally.
RIM said it is receiving continued support and entusiasm from its developer community, with growth of its app store growing 200 per cent in the past year to feature more than 80,000 apps. There are now 15,000 apps for the PlayBook compared to less than 2,000 last year. It said this bodes well for its ecosystem when it sets out to launch BlackBerry 10.
IHS Global Insight telecoms analyst Dexter Thillien said the early update on RIM’s performance shows it has been outperformed in the market, and that delays in launching the all important BlackBerry 10 platform could see it go head-to-head with the likes of Apple and Samsung.
“With BlackBerry 10 due to be launched later this year, this was always going to be a tough few months for RIM, which hoped that sales of BlackBerry 7 devices in emerging markets like India and Latin America would offset some of its losses in developed markets in North America in Europe,” he said.
“The company didn’t provide any shipments guidance, but the loss would suggest weakness in those markets continues to remain high with the company struggling to sell smartphones and tablets in the face of fierce competition.”
“BlackBerry 10 is last chance saloon for RIM but the delay in getting it to market is a major drawback for the company, as a late launch could potentially put it into competition with new devices from Apple and Samsung.
“The availability of BBM on other platforms would further the attraction of BlackBerry devices, and it is also likely, should RIM continue to perform badly, that competitors may wait for the company to go under and acquire its most compelling assets at a knock-down price, as happened with fellow Canadian company Nortel.”