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March 30, 2012

RIM’s continued disintegration sees CEO clean house

Following its very poor fourth quarter results, Research In Motion’s new CEO has cleared out senior staff, reduced its focus on the consumer market and has not ruled out an outright sale.

By Vinod

RIMs fourth quarter results were even worse than most pessimistic analysts had predicted, as its BlackBerry smartphone sales fell sharply, and several writedowns left the former Canadian giant in the red to the tune of US$125 million.

RIM’s revenue of US$4.2b in the latest quarter is down 19% from $5.2 billion in the previous quarter and down 25% from $5.6 billion from this time last year.

Thorsten Heins
New CEO Thorsten Heins has been brutal

This is RIMs first quarterly loss since 2005, and follows a disastrous year that saw 75% of the company’s value wiped out. Disasters such as its Playbook tablet launch, a $54 million network outage and endless delays to its new BlackBerry 10 OS and hardware have seen analysts write off the company in the face of stiff competition from Apple and Google Android devices.

By way of comparison, Apple sold some 37m iPhones in the last three months of 2011. RIM shipped just 11.1m BlackBerrys across the same period (a drop of 21% from the third quarter) – many of which were in developing markets where the aging BlackBerry 7 devices remain popular. It is still struggling in the US, and Apple recently outsold BlackBerry in its home country of Canada for the first time.

RIMs BlackBerry Playbook tablet did finally cross 500,000 in sales on heavy discounting. The 16GB model, which launched at £399, can now be bought for just £169 – well below any possible profitable margin, and more a concession that the company is ‘dumping’ its inventory to the tune of £485m, rather than attempting to seriously tackle the iPad.

In an almost unheard of move, New CEO Thorsten Heins announced that RIM would no longer be offering financial guidance for any future quarters. He did announce that "the company expects continued pressure on revenue and earnings throughout fiscal 2013."

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Former CEO Jim Balsillie also announced his ‘retirement’, forced out by the new management. Balsillie and former co-CEO Mike Lazaridis famously dismissed the iPhone and tablet computers; these products went on to define the modern computing world and have led to much of RIMs current woes. Lazaridis remains on the board.

Heims also removed several other senior executives, including chief technical officer David Yach and chief operating officer Jim Rowan, who have overseen much of the problems with the long delayed BlackBerry 10 platform. Heins maintains that the BlackBerry 10 platform is ‘on track’ for launch in the latter part of calendar 2012.

The Globe and Mail is also reporting that many other senior vice-presidents and vice-president level staff were to be let go, in what is rapidly becoming a wholesale clean out for RIM.

Heins said he is refocusing the company on its key core products, such as BlackBerry Mobile Fusion and will also be undertaking a comprehensive review of the company’s strategic opportunities "including partnerships and joint ventures, licensing, and other ways to leverage RIM’s assets and maximize value for our stakeholders."

When an analyst asked about an outright sale of the company, Heins did not rule out a partial or full sale, although maintained this was not the key focus of his review.

Despite the company’s recent successes with BlackBerry Messenger, and the low-end consumer market in the UK and countries such as South Africa, Indonesia and South America, Heins said the company is returning its focus to the corporate market.

The world is moving to a consumerised environment; that is, enterprise consumers want a retail consumer experience on their smartphones, which has led to a merger of the two markets in the last 18 months. Heins’ decision seems a bit bizarre, given much of RIMs problems have stemmed from a lack of focus on these consumer desires.

"We believe that BlackBerry cannot succeed if we try to be everybody’s darling, and all things to all people," Mr. Heins said.

Despite this supposed enterprise-first strategy, RIMs marketing maintains its focus on the consumer: its website still focuses on DJ sponsorship deals, social media and the company continues to sponsor UK TV shows such as Morgan Spurlock and concerts such as Jessie J.

Even Yach, Rowan and Balsillie remain on the company’s website – highlighting the less than planned nature of this announcement.

This is, without a doubt, a sudden and desperate U-turn by a company sinking in quick sand.


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