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During the companys recent quarterly report, Research In Motion CEO Thorsten Heins had the unenviable task of assuring analysts and shareholders that, though he’s been on the job only 10 weeks, he well understands what’s necessary to, if not bolster the company, at least stanch the bleeding.
RIM executives shared during the company’s fiscal fourth-quarter earnings call March 29 that BlackBerry smartphone sales fell by 21 percent between its third and fourth quarters. During the same period, revenue fell 19 percent.
Heins and his teamwhich no longer includes co-CEO-turned-board-member Jim Balsillie or longtime CTO David Yachhave a plan, though Heins admitted it was “not without risks and challenges, and there is no guarantee of success.”
The plan includes bringing the BlackBerry 10 platform to market, “refocusing resources on RIM’s key opportunities”which is to say, scaling back consumer marketing and again aggressively focusing on enterprise customersand implementing programs for greater employee accountability and efficiency.
“In parallel, we are undertaking a comprehensive review of strategic opportunities, including partnerships and joint ventures, licensing and other ways to leverage RIM’s assets and maximize value for our stakeholders,” Heins said in a statement.
Were his assurances enough to convince an industry that has watched RIM’s fortunes slip while Apple’s glide ever upward?
Equity firm Canaccord Genuity wrote in a March 29 note that it was lowering its already-below-consensus estimates for RIM.
“While RIM management remains bullish on long-term prospects for BlackBerry 10 smartphones, we maintain our more cautious outlook,” wrote its analysts. “We believe [BlackBerry 10] smartphones will launch into an even more competitive smartphone market, as we anticipate continued innovative, new Android LTE [Long-Term Evolution] smartphones, an increase in Windows smartphone offerings from Nokia and other OEMs, and a refreshed LTE iPhone 5. As such, we have modest BB 10 sales estimates.”
Jack Gold, principal analyst with J. Gold Associates, was a little more positive. “They still have a loyal, if shrinking, following in the enterprise, and especially in other parts of the world. But, having said that, they need to start executing, including getting BlackBerry 10 out to market post-haste. If it slips past the fall of this year, it will get even uglier for RIM,” Gold told eWEEK.
Gold added that Heins seems to understand the urgency of the situation and to be making moves that Balsillie and former co-CEO Mike Lazaridis didn’t.
“He also seems to be open to exploring all kinds of business models, which is good,” said Gold. Also good, he added, is that RIM sold 500,000 PlayBook tablets during the quarter. While not iPad figures, it suggests some early acceptance of BlackBerry 10, which he says has the same core DNA. Plus, “that’s a lot of devices they could potentially leverage.”
Roger Kay, principal analyst with Endpoint Technologies, offered a less sunny view. “The features [BlackBerry] has been valued forencryption, push email and good messaginghave been matched by Apple and Google. And the others have aced the consumer segment. Paring back the company to service its core of business users makes sense,” Kay told eWEEK.
However, that doesn’t solve RIM’s sales problem.
“Since RIM isn’t a telephone company, it can’t just bill its subscribers. It has to continue to sell them something. Server license revenue and client hardware sales are its bread and butter,” said Kay.
“Perhaps RIM could make a business out of keeping its existing adherents happy, but that’s a much smaller-scale business. Perhaps the company should be open to changing its mix of hardware, software and services to adjust to focusing on the needs of its core customers,” Kay continued. “Once it’s pared down to size, the company can operate independently or as part of a larger organization. It hardly matters.”
Darkest of all was financial services firm Jefferies, which told investors in a March 30 research note, “We expect trends to get worse from here and think the August [quarter] will be dire.”
Its analysts added that they see risk to Wall Street estimates and maintain their $12 target and “underperform” rating.