RIM Has Many Positives but Faces a Rough Road Ahead
New RIM CEO Begins Painful Restructuring of BlackBerry Maker
Research In Motions new CEO, appointed to the post two months ago, is beginning what promises to be a painful restructuring of the struggling BlackBerry maker that he says does not hold any guarantees, and will probably be followed by even more changes.
On a conference call March 29 with analysts and journalists, CEO Thorsten Heins outlined an initial shake-up in RIMs management structureincluding the resignation from the board of directors of one of the CEOs he replaced, Jim Balsillieand essentially said the company would end its flirtation with the consumer market. RIM instead will focus on enterprises and emerging markets as it prepares for the crucial launch this fall of mobile devices running on the companys upcoming BlackBerry 10 software platform.
Heins outlined the challenges RIM is facing in the highly competitive smartphone market from Apple and the various device makers who run on Googles Android operating system, and also pointed to internal failures over the past couple of years, such as RIMs misreading of the booming bring-your-own-device (BYOD) trend, with employees pushing to use their personal mobile devicesparticularly smartphones and tabletsin the work environment, an area once dominated by RIM and its BlackBerry devices.
The competitive environment has become increasingly challenging, he said, adding that its plans are not without risks and challenges, and there is no guarantee of success.
Its already been a tough couple of years, and the last financial quarter was no different. During the fourth quarter of RIMs fiscal 2012, the company generated $4.2 billion in revenuea 25 percent drop from the same period in 2011and lost $125 million. During the quarter, RIM shipped 11.1 million BlackBerry smartphones and more than 500,000 BlackBerry PlayBook tablets. The company has about $2 billion in cash on hand.
RIM has a steep slope to climb to get back to competing against the likes of Apple and Google. According to a Nielsen report released March 29, almost half of U.S. mobile device owners have smartphonesa 38 percent jump over a similar study in February 2011with Android leading the smartphone market with 48 percent share. Another 32.1 percent of smartphone owners have an Apple iPhone, with 11.6 percent owning a BlackBerry.
However, of the new owners over the last three months of the survey, 48 percent chose an Android device and another 43 percent an iPhone. Only 5 percent chose a BlackBerry.
RIM Has Many Positives but Faces a Rough Road Ahead
Heins said his review of the company since January told him that while RIM has many positives on its sideincluding a dedicated workforce and more than 77 million customerstheres still a lot of work to be done on RIMs side to meet the demands of our customers. ¦ It is very clear to me that substantial change is what RIM needs.
A key change was Balsillie's resignation from the board, a move that effectively ended his 20 years with the company, during which time hewith Mike Lazaridis as co-CEOoversaw RIMs dramatic rise and subsequent decline.
In addition, David Yach retired as CTO of software after 13 years with RIM, while Jim Rowan, COO of global operations, left the company. RIM is currently searching for a COO to run all the companys operations, Heins said.
The BlackBerry maker also is pulling back from its attempts to gain traction in the consumer space, he said. Instead, the focus will be on the enterprise.
"We believe that BlackBerry cannot succeed if we try to be everybody's darling and all things to all people," Heins said.
As it works toward the launch of the BlackBerry 10 devices, RIM also will look to leverage enterprise-centered offerings like the BlackBerry Mobile Fusion software platform. BlackBerry Mobile Fusion helps RIM deal with the growing BYOD trend, enabling businesses to integrate BlackBerry smartphones and PlayBook tablets with Apple iPhones and iPads and Android devices.
Heins also said RIM will churn out more entry-level BlackBerry 7 devices, with an eye toward enticing businesses to upgrade to more enterprise-level offerings, particularly the BlackBerry 10 products. BlackBerry 10, which initially was due out earlier in the year but was pushed back to the fall, is on track for the later release, Heins said. Developers will be able to get their hands on the software platform at BlackBerry World this summer.
Heins and Chief Financial Officer Brian Bidulka said RIM would undergo a significant reorganization that is aimed at driving greater efficiencies, increasing management accountability and cutting $1 billion in expenses by the end of the companys fiscal year 2013. Even with all the changes, the road ahead will be difficult, Heins said.
Its likely that the next few quarters will continue to be challenging for our business, he said.
When asked whether he planned to break up the company, or sell off parts of it, Heins indicated he was keeping all options open. The current plan is to move forward with all its businesseshardware, software and services, he said, but RIM executives were weighing everything, and could decide that it might make more sense to, for example, focus on software and services and let a third party build the hardware.