Is this the beginning of the end for RIM?
commentary A year from now, Research in Motion (RIM) may not exist.
Where does RIM go from here?
(Credit: Brian Bennett/CNET)
A little while ago, that might have been a controversial call. Sure, RIM had its share of problems, but many were willing to give it some space to possibly turn itself around. But after yesterday's first-quarter warning, and disclosure that it has hired bankers to advise it on strategic reviews, it's perfectly reasonable to assume that RIM's days, as a standalone company, are numbered.
All you have to do is look at the bankers. RIM said that it hired JP Morgan and RBC Capital for strategic advice. When a company hires bankers to explore strategic options, it's corporate-speak for looking at a sale. The company could either be swallowed up by another technology giant, or have its assets diced up and sold like slices of pizza.
While exploring strategic alternatives isn't any guarantee that RIM will be sold, it can be seen as a tacit admission that there are shrinking opportunities for the company as a standalone entity, and that a turnaround may not be in the cards. For RIM's shareholders, who have seen the stock consistent tank, a sale may be the best way out.
I can't say who would want to buy RIM. I've written in the past that, beyond the lucrative patent portfolio, it would make little sense for any outside company to attempt to turn the business around. But I am sure there is interest in the business, which boasts a global subscriber base of 78 million.
A sale, in any form, would mark a sad ending to what was once a high-flyer in the smartphone world. Just a few years ago, RIM was riding high on the success of its BlackBerry line, including the consumer-friendly Pearl, flagship Bold and mass-market Curve. It was the must-have accessory of the white-collar worker.
But, like former smartphone leader Palm, RIM failed to quickly innovate beyond its core secure email service and fell behind Apple's iOS, and then Google's Android. Once RIM launches its next-generation BlackBerry 10 platform, it will be behind Android, iOS and Microsoft's Windows Phone. A fourth-place position, with a non-existent share of the market, is a terrible position to start in with a brand new operating system.
A look at its current and planned product line-up spells out its key dilemma: Virtually nobody cares about BlackBerrys. At least, in its core markets, such as North America, BlackBerry 7 phones collect dust on store shelves and warehouses; RIM will likely have to write-off its inventory again. Yet, it's still several months away from a BlackBerry 10 product. That leaves an uncomfortable gap for a company that depends on a constant flow of smartphone sales.
While the results from the last quarter were bleak, RIM managed to paint an even uglier picture for the fiscal first quarter — all in its trademark (inappropriately) upbeat tone. The company expects an operating loss, even after it takes out the one-time items that weigh on results. Even during the tough fourth-quarter period, it still managed to eke out a gain on an operating level, despite an actual loss.
An operating profit or loss is seen as how well the company's core business did. So, an operating loss is a good indication of just how grim RIM's troubles have gotten.
It wasn't all bad, as RIM continues to see some life in international markets. But in those regions, the company is stuck selling lower-priced, and less profitable, BlackBerry models.
RIM could still continue to go at it alone. Heins talked up the company's cost-cutting program, and their goal of slashing US$1 billion in costs by the end of fiscal 2013. I don't think the company will go out of business soon; even at its current rate of deterioration, it could last for several years in a depressing slide.
But would it want to?