Research in Motion has been hit with yet more setbacks and its fifth poor quarterly showing, resulting in layoffs at the upper levels of the company and conflicting reports of whether or not it will stick with the consumer market.
The company reported its fourth fiscal quarter results at the end of March and in the space of a year, it went from a profit of US$934 million, or US$1.74 a share, to a loss of US$125 million, or 24 cents a share, on write downs of assets and on poor sales. Sales fell 25 percent during the same period to US$4.19 billion.
A survey of analysts expected the company to post earnings per share of 81 cents on a revenue of US$4.54 billion. BlackBerry shipments fell to 11.1 million in the fourth quarter from 14.1 million in the previous quarter. Excluding one-time items, the company reported an adjusted profit of US$418 million, or 80 cents a share.
Most of the losses were on paper and not actual money out the door. They stemmed from writedowns of goodwill from unsold product. Still, it's a huge swing in a short period, one that put new CEO Thorsten Heins on notice of just how bad things are.
"It’s now very clear to me that substantial change is what RIM needs," Heins said in a conference call and with analysts after the numbers were announced. He started by cleaning house at the top. Jim Balsillie, former co-CEO, resigned as board director, CTO David Yach resigned after 13 years with the company, and COO Jim Rowan also left the company.
Heins is also getting RIM out of markets where it can't compete, such as consumer products like its music service. This caused a mistaken report that the company was getting out of the consumer market, but it later issued a statement clarifying its position.
Heins made a number of admissions on the earnings call. He said the lack of an LTE phone has hurt the company; the "BlackBerry 4G" phone AT&T has been hawking is a HSPA+ phone, not LTE. Too few existing customers have upgraded to the newer Blackberry 7 phones, even though they are considerably faster than the older models. Heins said the Playbook "now has over a million customers," which is what Apple sells in the course of a week.
The Downward Spiral
The result is a shrinking share of the market. The most recent results from Nielsen show that smartphones are taking off in the U.S., with half of all Americans who own a cell phone owning a smartphone. That's up from 38 percent smartphone penetration just one year earlier.
But RIM's share is shrinking fast. Overall, it had 12 percent of the market, and in the last three months of sales through February, BlackBerry phones accounted for just 5 percent of sales, with Android and iPhone virtually tied in the low 40 percent range.
Even RIM's standby customers are bailing. The Politico reports that federal government agencies are ditching BlackBerry phones in favor of Android. Perhaps the greatest indignity: even Canada is abandoning its native sons at RIM in favor of Apple.
Still, it would be a mistake to write off RIM just yet, argues Jack Gold, president of J.Gold Associates, who follows the mobile market. He notes the company only lost money on paper, it still sold 11 million phones, and it has almost $2 billion in the bank.
There is room for optimism. While the U.S. is shunning BlackBerry, other parts of the world are doing well. Gold said there were riots in Indonesia when the latest generation of BlackBerry phones were released because they couldn't get into the store.
Also, Samsung is reportedly considering licensing BlackBerry OS 10 for its own phones, when RIM finally ships it later this year. That has to happen, and soon, said Gold.
"The bottom line is they gotta get out BlackBerry OS 10 out post-haste and they gotta execute and people have to like it," he said. "If they can get a good developer base out of it and tap into their loyal customer base, then they might win some people back."
RIM is expected to distribute prototype versions of its new smartphones running BlackBerry 10 at its developer's conference in May. This will be the OS that merges BBOS with the QNX operating system on the PlayBook tablet. RIM plans to release devices using BlackBerry 10 in the latter part of 2012.
Exiting services like music and low-end smartphones was the right choice, said Gold. "They are trying to pick their fights, which is a smart thing to do. What they have to do is play to their strengths and build on that. Their strength is still the business user, the prosumer and business users, the high end of the market."
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