RIM expects loss, plans 'significant' job cuts

David Manning / REUTERS

RIM's CEO Thorsten Heins is silhouetted during a BlackBerry event in Orlando in early May.

By Roland Jones

Updated at 5 p.m. ET: Research in Motion, which revolutionized the mobile industry with the once-ubiquitous BlackBerry, is racing against time as it tries to launch a new line of smart phones while struggling to remain afloat.

Amid reports that the company plans to eliminate at least 2,000 jobs, RIM CEO Thorsten Heins said late Tuesday that the next few quarters will be "challenging" and that the company had hired two investment banks to review its operations.

Heins also said in a?statement?that the company expects to post an operating loss for the current fiscal quarter, which ends next week. RIM shares fell sharply in after-hours trading on the news.

Heins said the company is moving ahead with plans for "significant" headcount reductions in an effort to save $1 billion in annual expenses, although he did not confirm reports tha the company plans to eliminate at least 2,000 jobs across its worldwide operations, according to some reports. RIM has about 16,500 employees worldwide.

But analysts are doubtful that the maker of the BlackBerry, a one-time darling of Canada?s technology industry, can shrink enough, or become competitive enough, to fend off the stiff challenge it faces from Apple?s iPhone and Google?s Android software.

?We maintain that the only path for RIM is to partner with someone, to be acquired, or to turn themselves into a software company, and I think that path with become very clear to the management team by the end of the year,? said Jefferies & Company analyst Peter Misek, who covers wireless companies.

RIM has faced declining market share and revenue in recent years as smartphone devices such as iPhones and Androids have soared ahead of BlackBerrys.

The Canadian company is pinning its recovery hopes on the launch of the Blackberry 10 -- the next-generation mobile platform that will power a suite of new smartphones that is expected to hit the market later this year.

Analysts such as Jim Moorman of S&P Capital IQ are questioning whether the launch of the new operating system will arrive too late to take back market share lost to industry heavyweights like Apple, Google and Samsung.

Moorman notes that the much-anticipated -- and delayed -- Blackberry 10 launch will come around the same time that Samsung, HTC and Apple are due to launch updated smartphones.

?This is not a good moment for [RIM] to launch a new product,? he said. ?This raises concerns for me. It?s an already delayed launch and it?s going to be coming out in the middle of some other key product launches.?

RIM faces other headwinds, Moorman notes, including a declining subscriber base. RIM has added new subscribers to its services at a healthy clip of around 4.5 million users per quarter for the last seven quarters, but that pace slipped to 2.9 million in the most recent quarter, he said.

Related: RIM to cut thousands in global restructuring -- reports

At the same time, sales of BlackBerry devices are declining, down 6.5 percent in the last fiscal year, ended March, from the year before, Moorman said. And the company is expected to soon make a third huge writedown on unsold smartphones and PlayBook tablets, analysts say.

The strengths of RIM?s BlackBerry are its long batter life and security, both of which are benefits to business travelers, Moorman notes, but he adds that other device makers are begging to chip away at RIM?s ?special sauce,? improving the batter life of their devices. And a series of high-profile global network outages for BlackBerry might have turned off some business customers.

RIM also faces perennial problems at the C-suite level, analysts say. After RIM?s co-CEOs Mike Lazaridis and Jim Balsillie stepped down from their leadership roles earlier this year, a new CEO, Thorsten Heins, who was a relatively unknown executive at the company, stepped forward.

Despite the new leadership, analysts say the company faces the same old problems, including fierce competition, chronic delays on its new technology launches and a brand that has lost its standing among consumers.

?It seems the new management team is set on rebuilding the company?s brand with the BlackBerry 10 platform,? said Moorman. ?I think it will be a struggle for them. I think we?ll continue to see RIM muddle through, but it will be a tough battle.?

?I think RIM will continue to bleed for a while, unless the share price gets so cheap that they become an acquisition target, but that?s not what the company wants,? he added. ?They are probably just waiting to see how the launch of BlackBerry 10 goes.?

Anindya Ghose, an associate professor of management at New York University?s Stern School of Business, reckons RIM needs a new, visionary leader to help the company pull out of its tailspin.

?To put it bluntly, they need someone like Steve Jobs,? he said.

Ghose points to when Steve Jobs returned to Apple in the late 1990s after having been thrown out 10 years earlier. He was faced with a company with low morale, stagnant sales and little sense of direction, and instituted radical changes to turn the company around.

?You need a visionary like him,? Ghose said.

Jefferies? Misek says RIM would do well to turn their hardware business into a niche company and offer its smart phone software to other handset makers, such as Apple. At this point the likelihood of RIM being acquired by another company looks slim, he added.

?Is there value that can be found in these assets?? he asked.

?With a market cap of about $6 billion and net cash of about $2 billion, its enterprise value is $4 billion,? Misek said.

?If that?s not enticing enough for someone to buy this company I don?t know what is. Basically, if you pay a 25 percent premium, you can buy Research in Motion for $5 billion dollars right now, and that?s a very reasonable price. So it?s already cheap and it?s not attracting any buyers,? he added.

(Click here to check on Research in Motion's share price.)

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