RIM shares drop on warning of operating loss

Shares in Research in Motion Inc. fell eight per cent in after hours trading Tuesday after it announced it would report an operating loss at its next earnings report on June 28.

Firm says more layoffs coming

Blackberry smartphones shown on display at the CeBIT 2012 technology trade fair in Hanover in March. Sean Gallup/Getty (Sean Gallup/Getty)

Shares in Research in Motion Inc. fell eight per cent in after hours trading Tuesday after it announced it would report an operating loss at its next earnings report on June 28.

Its stock was down 88 cents at $10.35 US late in the afternoon, after earlier trading to as low as $9.50.

Waterloo, Ont.-based RIM also confirmed it would be making more cuts to its workforce of about 16,500, but would not say how many.

There have been several reports recently that have suggested RIM will cut at least 2,000 jobs at its operations around globe as part of a massive restructuring.

The cuts would follow a move last year to cut roughly 2,000 jobs.

RIM also said it has hired RBC Capital Markets and JPMorgan Chase firms to advise on the BlackBerry-maker's troubled business and financial performance.

Chief executive Thorsten Heins, who took on his role in January, said in a statement that competition was cutting into sales.

"Our financial performance will continue to be challenging for the next few quarters," Heins said.

"The on-going competitive environment is impacting our business in the form of lower volumes and highly competitive pricing dynamics in the marketplace, and we expect our [first quarter] results to reflect this, and likely result in an operating loss for the quarter."

"The big surprise is the magnitude of the loss," Troy Crandall, an analyst with MacDougall, MacDougall & MacTier, told CBC News.

Analaysts had expected a profit of about 43 cents a share in this quarter.

"That’s a significant deviation " from expectations, Crandall said. "What they are saying here is that things are way worse than anyone had anticipated."

The firm also said it added only half a million subscribers in the quarter, versus expectations for 1.5 million.

That underscores for Crandall how important it is that RIM succeed with its launch of the BlackBerry 10, expected by the end of this year.

The launch will coincide the debut of Apple's iPhone 5 and the new Microsoft Windows phone.

Survival depends on the BB10, Crandall said. If it fails, he predicted, that's then management will look at selling the entire company, or breaking it into pieces to be sold separately.

The company had earlier said it was looking at what strategies it could adopt to meet fierce competition from rivals such as Apple Inc.

Then, it said putting itself up for sale was not high on its list of priorities.

The company has been undergoing major changes to its executive team in recent weeks as various key players exited their roles.

On Monday, RIM announced that its chief legal officer, Karima Bawa, is retiring. That news followed the departure last week of Patrick Spence, the BlackBerry maker's head of global sales.

The announcement follows a report that RIM's stockpile of older smartphones and tablets has increased by two-thirds in the past year, a troubling development that could see the BlackBerry maker have to write the devices off as sunk costs.

Inventory swells

Bloomberg reported Tuesday that the company's internal inventory of its own devices swelled by 18 per cent in the last quarter, a rate much faster than that seen at its technology rivals. The news agency now says RIM has more than $1 billion worth of devices gathering dust in warehouses, up from $618 million a year ago.

That figure only counts BlackBerries and PlayBooks in RIM warehouses, not those being held in stock at retail stores across the globe.

After pioneering the smartphone space, RIM has seen its share of the market dwindle in recent years as consumers have opted for Apple iPhones or other devices that run on Google's Android operating system. Research company IDC estimates RIM now has about seven per cent of the global smartphone market, down from in excess of 30 per cent several years ago.

Worldwide shipments of BlackBerries slipped 29.7 per cent last year, IDC says. Those slowing sales have caused RIM's inventory to creep higher because it's still making the same number of phones but just not selling them. It's a trend unlikely to change any time soon as consumers appear to be holding out for the BlackBerry 10 to come out — which would render those older BlackBerries obsolete in many consumers' eyes.

Initially expected in early 2012, BB10 is RIM's most ambitious attempt to re-invent itself with consumers. The company is currently targeting a release in September 2012, but there are signs of more delays in the offing.

"If they have to meet a September deadline for BB10 phones then they should have been sending them now," Northern Securities analyst Sameet Kanade told CBC News "There's no product, there's still [just a] prototype."

"If it's not happening in September you miss a key deadline so probably [it's] next calendar year," Kanade says.

With files from The Canadina Press