Battered BlackBerry maker could overhaul its business

TORONTO – BlackBerry-maker Research in Motion has hired a team of bankers to help it weigh its options as its business erodes in the face of an exodus to the iPhone and Android smartphones.

 

RIM issued a dire warning about its business Tuesday, saying it is losing money for the second-consecutive quarter and will have to lay off a "significant" number of employees.

The company based in Waterloo, Ontario, said it has hired J.P. Morgan and RBC Capital Markets to help it evaluate its options. Those including partnering with other companies, licensing software and overhauling its business, it said.

RIM made no mention of selling of the company. But new Chief Executive Thorsten Heins did not rule that out after RIM's last earnings report in late March.

Colin Gillis, an analyst with BGC Financial, said the company is in a downward slide that's not slowing. He said he doesn't see any buyers for RIM coming forward soon.

"Unfortunately, it falls into the too little, too late category," Gillis said. "It doesn't mean somebody won't try it. It doesn't mean it's going to be a savior for the company either."

The statement from RIM did not detail the coming layoffs, other than to say the company expects "significant spending reductions and headcount reductions in some areas throughout the remainder of the year."

Jefferies analyst Peter Misek said he expects RIM to announce as many as 5,000 layoffs soon. The company has about 16,500 employees now after cutting 2,000 jobs in July.

RIM said the company looks to save $1 billion — even as it transitions to its much-delayed "BlackBerry 10" software platform expected out later this year.

RIM's stock fell 7%, or 80 cents, to $10.43 in extended trading following the release of the company's statement. Before Tuesday's announcement, the stock had lost almost 75% in the last year.

The company that pioneered the smartphone market with its BlackBerry phones is facing the most difficult period in its history. RIM's U.S. share of smartphones dropped from 44% in 2009 to 10 percent in 2011, according to market researcher NPD Group.

It still has 78 million active subscribers across the globe, but Apple Inc.'s iPhone and smartphones from companies including Samsung and HTC that use Google Inc.'s Android software are gobbling up market share.

"The on-going competitive environment is impacting our business in the form of lower volumes and highly competitive pricing dynamics in the marketplace," Heins said in Tuesday's statement. He said the company will likely post an operating loss when it reports its fiscal first quarter results on June 28.

Heins, formerly a little known chief operating officer at RIM, took over in January after RIM founder Mike Lazaridis and longtime executive Jim Balsillie stepped down as co-CEOs after the company lost tens of billions in market value.

RIM has tried to make phones with touchscreens that resemble the iPhone, but those offerings have largely flopped. And so has RIM's tablet, the PlayBook, which uses the very software that will be in the new BlackBerry 10 smartphones.

The company is following the same trajectory as struggling Finnish handset maker Nokia and California-based Palm, both of which attracted consumers with trend-setting phones and technologies in their heyday, only to be outmaneuvered by competitors. In Canada, there is fear that the nation's biggest technology company could go the way of former Canadian tech giant Nortel, which declared bankruptcy in 2009 and was picked over for its patents.

RIM was "the leader and this is what happens in the technology cycle of creation and destruction," Gillis said. "They rode the first wave of the smartphone revolution and Apple is riding the next one."

Android, iOS Crush BlackBerry Market Share

IDC's worldwide ranking of smartphone platforms sees RIM dip below 10% as Android and iOS continue to make big gains.

Research In Motion's BlackBerry platform dropped from 13.6% of the world's smartphones in the first quarter of 2011 to just 6.4% of the world's smartphone in the first quarter of 2012, according to numbers released by IDC. The new stats show RIM's share dropping precipitously, while its competitors grow stronger and stronger.

Google's Android platform is the top platform worldwide, with 59.0% of market thanks to 89.9 million units shipped during the first quarter. Android grew an astonishing 145% year-over-year. Much of that growth can be attributed to the never-ending onslaught of new devices that range from entry-level handsets to flagship hero devices.

Apple's iOS platform follows Android with 23.0% and 35.1 million units shipped. It, too, saw massive growth with an 88.7% increase year-over-year. The iPhone 4S--even though it wasn't the iPhone 5 that everyone wanted--has proven to be a very popular device.

"The popularity of Android and iOS stems from a combination of factors that the competition has struggled to keep up with," said Ramon Llamas, senior research analyst with IDC. "Neither Android nor iOS were the first to market with some of these features, but the way they made the smartphone experience intuitive and seamless has quickly earned a massive following."

[ What's in store for Android? Read Android 4.0: HTC, Motorola, Sony Chart Different Paths. ]

The next closest platform is Nokia's aging Symbian, which held onto just 6.8% of the market thanks to shipments of 10.4 million units. Its presence shrank 60.6% year-over-year. Sales of Symbian devices fell off a cliff a year ago when Nokia announced that it would transition away from Symbian in favor of Microsoft's Windows Phone platform.

BlackBerry's 6.4% of market can be attributed to shipments of just 9.7 million smartphones. It wasn't too many quarters ago that RIM was shipping nearly double that number of smartphones. While the company resets itself with BlackBerry 10, its aging lineup of BlackBerry 7 devices aren't enticing buyers.

What's pathetic is that Linux actually managed to grow its market share to 2.3% on shipments of 3.5 million devices. Linux shipped more than Windows Mobile and Windows Phone 7 combined.

Microsoft's mobile platforms together held onto 2.2% of the worldwide smartphone thanks to shipments of about 3.3 million devices. This despite the fact that the Lumia 800 and Lumia 710 saw decent sales across most markets in which they were available. IDC's numbers (thankfully) don't include the Lumia 900's contribution because it didn't launch on AT&T's network until April. Since the Lumia 900 has "exceeded expectations" at AT&T, there is some hope that Microsoft's struggling platform might eventually get off the ground.

"In order for operating system challengers to gain share, their creators and hardware partners need to secure developer loyalty," said Kevin Restivo, senior research analyst with IDC. "This is true because developer intentions or enthusiasm for a particular operating system is typically a leading indicator of hardware sales success."