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RIM shares plunge: 'It's a matter of survival now'
From CrackBerry to 'depressing': The BlackBerry's 5-year fall
RIM shares plunge: 'It's a matter of survival now'
RIM plunges
Shares of Research In Motion Ltd. plunged today in the wake of the company's brutal first-quarter results and the decision to delay its crucial new BlackBerry 10.
Yesterday's report, and the further collapse in RIM's stock price, illustrate how the BlackBerry maker's stunning fall from grace continues amid heated competition from the likes of Apple Inc.'s popular iPhone and devices running Google Inc.'s Android system.
Analysts, who began slicing their price targets on the stock after the report, believe we haven't seen the end of the troubles for what was once Canada's great technology hope, the company that gave the world the smartphone. They expect more job cuts, and a sale or break-up of the company if chief executive officer Thorsten Heins can't turn it around quickly.
RIM unveiled an ugly set of numbers late yesterday, a loss of $518-million (U.S.), or 99 cents a share, and an operating loss of $643-million. Revenue sank almost 44 per cent from year-earlier levels to $2.8-billion, and shipments of BlackBerry devices fell to 7.8 million, while the number of subscribers rose to about 78 million.
Most importantly, RIM again delayed its new generation of BlackBerry devices, on which its future is pinned, with Mr. Heins saying he would "not compromise the product by delivering it before it is ready" and expressing confidence in the smartphone when it gets to market. It's now expected early next year, but Apple and other manufacturers, such as Samsung, won't be standing still.
RIM also announced that it's slashing 5,000 jobs, and that its cash levels are up to $2.2-billion.
"Layoffs are not free - there's a use of cash with that," analyst Shaw Wu of Sterne Agee in San Francisco warned in an interview with Reuters. "They have to be very careful with their cash balance. It's a matter of survival now."
Analysts are particularly bleak.
Kris Thompson of National Bank Financial said "it's not too hard" now to see RIM broken up with a value of about $8 a share.
"First it was the chip, now RIM can't handle all the code," Mr. Thompson said of the delay of the new device.
"The story keeps changing; we're not buying it. RIM is a hardware vendor, not a software vendor. While more is often better, not so much in software code!"
He expects RIM to cut deeper, saying its current levels can support a global market share, while it will be "lucky" to capture 5 per cent.
He also noted the decline in revenue from its service operation.
"We've been warning investors that this cash cow is running out of milk," he said in a research note.
"We believe this was the last quarter of subscriber growth. International consumers are going to wake up soon to avoid BB7 handsets."
Mr. Heins said he was not satisfied with the results - no surprise there, he knew what the market reaction would be - and that he is working "aggressively" in all areas of the company.
Here's a sampling of what other analysts think:
"It is becoming clearer than ever that the company needs to wave goodbye to hardware and focus more on delivering services and licensing software. This quarter’s results have effectively confirmed that RIM can no longer afford to be a wholly vertical company with a fully integrated business model. From now on, any under-performance by the devices part of the organization would mean a significant churn of current BlackBerry users, which could lead to the collapse of the whole business including services. RIM is gambling on the launch of its forthcoming BlackBerry 10 operating system to redress the situation. However, the ongoing delay in launching the platform is not going to be in the favor of the company given its current bad performance." Malik Saadi, Informa Telecoms and Media
"We had expected BB10 to finally launch in October but integration issues with RIM's NOC/node infrastructure continue to plague the company. Our checks had indicated that the recoding of the infrastructure so that it would be compatible had been completed but apparently issues have arisen in its interface with BB10. We think execution risks will continue as RIM plans to lay off 5,000 of its 16,500 employees by February while at the same time launching its most pivotal product in the company's history." Peter Misek, Jefferies
"It’s like watching a puppy die. It’s terrible," Matthew Thornton, Avian Securities, to Reuters
"Wow, what a disaster ... From a numbers point of view, it could hardly be worse, and it’s going to deteriorate from here." Edward Snyder, Charter Equity Research, to Bloomberg
"The delay increases the likelihood of a sale. Even if BB10 launched in the fall against iPhone 5, it would be very, very tough to get consumers to try it out." Michael Walkley, CanaccordGenuity, to Bloomberg
From CrackBerry to 'depressing': The BlackBerry's 5-year fall
Remember the CrackBerry?
Five years ago, the buzzing gadget was all the rage -- the rock star of mobile communication and seemingly every office drone's high-tech status symbol.
Sober-minded professionals talked about BlackBerry addiction and "phantom vibrations" that caused users to reach for the devices even when they weren't actually doing anything.
"It's like Pavlov's dog," B. Marc Averitt, a technology investor, told The New York Times in 2007, referring to the gut-level longing users felt for the click-clack of the phone's keyboard and humming notice that a new personal message had arrived.
Fast-forward to Thursday, and what was the word?
"Depressing. That's the only word that comes to mind after reading the RIM Q1 financial results press release and listening to the conference call," Chris Umiastowski wrote for the site CrackBerry, which emerged in 2007, eight years after BlackBerry's first two-way paging device was released.
"(But) as crappy as the results were, I'm not going to write up a death certificate for RIM here."
He didn't. And that shows that the folks who still love their BlackBerry still really love their BlackBerry. But let's be clear: Some analysts do say it's over for the BlackBerry.
"Anyone who's been paying attention isn't surprised by BlackBerry maker Research In Motion's recent collapse," a blogger for ReadWriteWeb wrote. "It's unfortunate, but it's been inevitable."
BlackBerry maker Research In Motion announced Thursday it is laying off 5,000 people -- and said earnings for the past three months were significantly less than expected, with the company reporting a first-quarter loss of $518 million. Sales were down 40% from last year. Furthermore, the new operating system it's pinning its hopes on will be delayed until next year, or, a full year after it was originally expected.
Couple all of that with more reports that the company might be looking to sell off its once dominant service, and you had what amounted to a devastating head-kick for the Canadian company. It capped off a gut-punch of a financial year that has seen RIM's stock price drop 70%.
So, what happened? As an even more gadget-obsessed society than we were five years ago, how did we stop being BlackBerry fiends.
Well, how's this for cruel and cosmic irony? A day after the dismal report, something called the iPhone celebrated its fifth birthday.
You might have heard of it. About 217 million of them have been sold.
It may not have been the very first smartphone. But Apple made it sexy. And fun. And the BlackBerry, to many, would soon become the thing they give you at work.
"Apple's new iPhone could do to the cell phone market what the iPod did to the portable music player market: crush it pitilessly beneath the weight of its own superiority," Lev Grossman wrote for Time. "This is unfortunate for anybody else who makes cell phones, but it's good news for those of us who use them."
The guy has since written a book called "The Magicians." He must have had a crystal ball.
Critics say RIM was too slow to react. To be sure, it maintained (and, to some degree, still does) the hard-core business user more concerned about reliability and security than playing "Angry Birds." But for many, the thrill was gone.
By the time they brought a touchscreen BlackBerry to market, the second-generation iPhone 3G was already capturing hearts and minds.
And even the goal of becoming the "other smartphone" got further away when Google unleashed its Android operating system and opened it up to phone makers everywhere. The first Android phone, the HTC Dream, hit stores in October 2008, around the same time as the BlackBerry Thunder. Google's quicker response paid dividends, and now there are more phones running Android phones than there are iPhones.
Ditto all of the above for the BlackBerry Playbook, RIM's entry into the tablet market that, to be kind, failed to meet sales goals.
None of this, as CNNMoney notes, means your BlackBerry will be a useless brick in the near future. RIM still has 78 million subscribers and $2.2 billion in cash on hand.
But as a cultural icon, it's hard to see the magic of the mid-2000s returning for the BlackBerry. It's enough to make you want to tap out a condolence note for the company -- even if many of us will be doing so on a touchscreen.
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