RIM Aims to Drive $1B in Savings

By Michelle Maisto  |  Posted 2012-05-30 Print this article Print

According to Reuters, RIM currently has 16,500 staff members globally, compared with nearly 20,000 at its peak.

The Canaccord analysts also pointed to RIM€™s belt-tightening efforts. €œRIM €¦ disclosed hiring two investment banks to explore strategic options and will commence significant cost reduction programs to cut $1 billion in annual operating expenses, versus [fourth quarter 2012] levels,€ they wrote.

The analysts were iffy on Heins€™ plan to move BB7 phones, as well as on the success BlackBerry 10 handsets will find when they arrive, given the tremendous competition they face.

€œWith increased smartphone competition from new Android and Windows smartphone launches, including the HTC One, Samsung Galaxy S III, Huawei Ascend and Nokia Lumia, RIM management expects continued soft results for the next couple of quarters, and this is consistent with our checks indicating very soft BlackBerry sales globally,€ states the report. It adds that by the time BlackBerry 10 launches, the market will likely also include an €œLTE iPhone 5.€

While RIM remains €œbullish€ on BlackBerry 10€™s prospects, the Canaccord analysts are maintaining a €œcautious€ outlook. They expect that, with RIM struggling to gain traction in the smartphone market, it €œmay eventually sell assets, sell the entire company or materially change its business model to a smaller niche supplier.€

Investors, they added, will focus on a €œsum of the parts analysis.€ RIM€™s network operations center (NOC) and subscriber base, at 78 million, is the majority of its value, they explain. To maintain its services business, RIM will need to continue making BlackBerry smartphones. RIM€™s enterprise base is roughly 20 million subscribers; RIM€™s lower-revenue consumer base, meanwhile, €œholds little value in an acquisition,€ the analysts wrote, €œdue to our belief this base is already at risk longer term to competing smartphone ecosystems.€

With Android phones and lower-priced iPhone 3GS and iPhone 4 handsets slowly taking over RIM€™s consumer base, they continued, €œ we believe likely suitors would assign minimal value to this business and would likely need to spend considerable cash to unwind this portion of RIM's business that would include shutting down the device segment.€

Analysts with Jefferies, more depressingly, note that selling the company first requires a willing buyer.

Microsoft, they said in a May 30 research note, €œwill wait to see how Windows 8 fares before possibly buying RIM. We do not think Facebook will buy RIM and believe most non-U.S. companies will be barred from buying RIM by the U.S. government.€

They added, €œWe believe licensing talks have cooled due to RIM€™s whipsawing views and deteriorating fundamentals. We think potential licensees will wait to see how the [BlackBerry 10] launch goes before making a decision.€

RIM€™s Heins, speaking to the press at the BlackBerry World 2012 event, said RIM had €œa little fat on the hips€ that needed to be slimmed down, but that, with new efficiencies and a clearer agenda in place, company morale was way up.

Follow Michelle Maisto on Twitter.


Michelle Maisto has been covering the enterprise mobility space for a decade, beginning with Knowledge Management, Field Force Automation and eCRM, and most recently as the editor-in-chief of Mobile Enterprise magazine. She earned an MFA in nonfiction writing from Columbia University, and in her spare time obsesses about food. Her first book, The Gastronomy of Marriage, if forthcoming from Random House in September 2009.

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