BlackBerry (Nasdaq: RIMM; Toronto: RIM) is in serious trouble, and unless something is done soon to stem the ongoing slide, the company that revolutionized corporate messaging with its Blackberry device may become a minor player, even in the markets it still dominates.
How bad is the company's current situation? Let's first review market reaction to RIM's latest quarterly results announced Thursday before diving deeper into what ails the Canadian OEM. Its stock price tumbled 21 percent today to $27.17 from $34.37, shaving about $4 billion from its market capitalization in a single day. As if that wasn't bad enough, several analysts dropped their ratings on the company, and a few even warned that the latest decline in market value was not steep enough.
RIM had on Thursday announced weaker-than-expected first quarter results and also warned that second quarter revenue and gross margin would trail expectations. It also said in a statement it would "begin a program to streamline operations across the organization, which will include a headcount reduction."
Here's how co-CEO Jim Balsillie described the company's first quarter performance and outlook:
Fiscal 2012 has gotten off to a challenging start. The slowdown we saw in the first quarter is continuing into the second quarter, and delays in new product introductions into the very late part of August is leading to a lower than expected outlook in the second quarter.
The first quarter results were not as horrible as investor sentiments might seem to portray. in fact, RIM's sales grew year-over-year, although gross profit margins and net income declined from the comparable year-ago quarter and sequentially. In addition, RIM is still a formidable player in the smartphone and corporate messaging markets. Its Blackberry smartphone is still wildly popular in developing markets, and the company shipped 500,000 tablet PCs in the first quarter.
With approximately $3 billion in cash, short-, and long-term investments, RIM isn't in danger of disappearing and can muster the resources to fight back as Balsillie rightly pointed out:
RIM's business is profitable and remains solid overall with growing market share in numerous markets around the world and a strong balance sheet with almost $3 billion in cash. We believe that with the new products scheduled for launch in the next few months and realigning our cost structure, RIM will see strong profit growth in the latter part of fiscal 2012.
That optimistic outlook may run against a harsher reality. RIM's products are not competitive enough against what is available in the market today, which explains investor pessimism about the company's future. The company is losing market share not only to Apple but also to competitors deploying the Android operating system from Google.
What is most frightening to observers of RIM and European rival Nokia is that both companies seem to have vastly underestimated the seismic shifts occurring in their business segments. They were both so dominant in their separate market segments for so long that they did not see the dark horses creeping up on them.
The rapid reverse of RIM's fortunes is painful to watch. I hope that whatever Balsillie has in mind will help bring the company back to life.
The competition is heading both ways. Enterprise players are expanding into the consumer sector and Apple, which started in consumer, is rapidly gaining customers in the enterprise market. This was inevitable; if RIM didn't anticipate the competition in its key market segment then the company is paying a price for being laid back.
@Ariella, Developers are hardly likely to dump Research in Motion. The company is still a major player in the smartphone market and it's unlikely corporate users will abandon it. What the company must do is not let the competition leave it behind. If it can focus on keeping up and then find ways to distinguish itself in the market it will survive. I'll be blogging soon on how I see things playing out in the market.
@Mr. Roques, You nailed it. Research in Motion isn't in trouble because it isn't growing relative to its previous performance. It is sliding because it is not growing fast enough and winning market share against rivals. In this market, you cannot measure your performance by holding up a stick against yourself. You evaluate your performance based on how the competition is doing. Right now, RIM is not stacking up well against Apple, period.
The numbers can be misleading because the market is still growing pretty quickly so the sales are going to be up but the market share is showing that RIM is falling behind.
That could be because users are migrating from RIM to Apple or Android. But it could also be that new users choose Apple and Android over RIM.
Apple is coming out with a messaging system, WhatsApp, Live Profile and other 3rd party systems are booming.
What holds together RIM? (IMHO)... security. It's the place to go for the corporate world. Android is lacking a lot.
Unfortunately, RIM is given a bad reputation nowadays mostly because of the user interface and limitation. Unless they make a big breakthrough with their products, I think that their product is still going to have a difficult time to get their market share back.
I find this article somewhat troubling as a current Blackberry user along with my wife. I have also had an Iphone, which is great in itself, but still more like an implement for entertainment. RIM has been on the top in the business world for a long time. Their phones have always made sure that business professionals can have access to multiple email accounts, spreadsheets, document writers and anything else an on the go person needs. Yes, there have been some failures across the handset line. I can only hope that there are some serious discussions companywide to keep RIM going in the right direction and stay a serious competitor in the business and mobile marketplace.
I think, and I will try to avoid saying “RIM should”, that focusing on developing markets will not bring stunning features to RIM’s offering. Presently consumer is looking for Apple/Google copy cats or something out of this mind. Having a company wide brainstorm session would bring something new. Yes it hard to come up with something different and outstanding, but it is not impossible.
By moving to the core of the industry and offerings services that keep the system humming, a group within the electronics market has rendered irrelevant the question of ownership and control of the supply chain.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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