Home / / RIM posts first quarterly loss in seven years

RIM posts first quarterly loss in seven years

BlackBerry maker warns of 33% drop in revenue for Q1 FY2013, delay for BlackBerry 10

RIM posts first quarterly loss in seven years
Thorsten Heins, RIM CEO and president, said the company will look to increase efficiency measures.

Research in Motion (RIM) has announced a loss of $518m for its fiscal first quarter to start of June 2012.

The company posted financial results for the quarter, with revenue down 33% from the previous quarter to $2.8bn, which also represented a drop of 43% from the same quarter last year.

GAAP net loss for the quarter was $518 million, or $0.99 per share diluted, compared with a GAAP net loss of $125 million, or $0.24 per share diluted, in the prior quarter and GAAP net income of $695 million, or $1.33 per share diluted, in the same quarter last year.

The results marked RIM's first quarterly operating loss in more than seven years with a net loss of 18.5%.

RIM also announced that its BlackBerry 10 smartphones have also been delayed to the first quarter of 2013, owing to complexities in integration of key features and large volumes of code into the platform.

Thorsten Heins, President and CEO said in a statement: "Our first quarter results reflect the market challenges I have outlined since my appointment as CEO at the end of January. I am not satisfied with these results and continue to work aggressively with all areas of the organization and the Board to implement meaningful changes to address the challenges, including a thoughtful realignment of resources and honing focus within the Company on areas that have the greatest opportunities."

The company said it was proceeding with its efficiency program CORE (Cost Optimization and Resource Efficiency), that was announced in March, and would look to increase the scope of the initiative. To date RIM said that CORE has seen a reduction in number of layers of management; streamlining of supply chain and manufacturing, including from 10 external manufacturing sites to three; outsourcing key parts of the Company's Global Repair operations; better focus on sales and marketing to chase the most profitable regions; outsourcing of non-core functions and a global workforce reduction of approximately 5,000 employees, which is expected to be completed by the end of fiscal 2013.

Analysts said the poor results and the delays to BlackBerry 10 did not bode well for the company. Malik Saadi, Principal Analyst at Informa Telecoms & Media said that the delay to BlackBerry 10 meant that he expected an ongoing poor performance from RIM for at least for the next three quarters, and that it is questionable whether RIM can maintain its cash position during this period and execute its strategic plans without having to exit parts of its market. RIM made a profit from services, but its hardware business suffered due to declining volume shipments and shrinking average selling price of devices. The company managed to ship only 7.8 million smartphones this quarter compared to 10.7 million recorded last quarter. The average selling price of BlackBerry smartphones declined to $218 from $258 recorded last quarter.

"It is becoming clearer than ever that the company needs to wave goodbye to hardware and focus more on delivering services and licensing software. This quarter's results have effectively confirmed that RIM can no longer afford to be a wholly vertical company with a fully integrated business model. From now on, any underperformance by the devices part of the organization would mean a significant churn of current BlackBerry users, which could lead to the collapse of the whole business including services," Saadi said.

"RIM is gambling on the launch of its forthcoming BlackBerry 10 operating system to redress the situation. However, the ongoing delay in launching the platform is not going to be in the favor of the company given its current bad performance. Bear in mind that 100% of the 78 million current BlackBerry users are still using legacy devices, so upgrading all these users to BB10 will not happen overnight and RIM might well lose a great number of these users in the process," he added.

Saadi suggested that RIM should consider licensing BB10 to other device vendors and extend the reach of BlackBerry services to beyond its own portfolio of devices.

Follow us to get the most comprehensive IT business news delivered fresh from our social media accounts on Facebook, Twitter, Youtube, and listen to our Weekly Podcast. Click here to sign up for our weekly newsletter on curated technology news in the Middle East and Worldwide.

REGISTER NOW | Webinar Event | Security you can bank on – Safeguarding the Middle East’s financial sector

Presented in partnership with security and network specialist Cybereason, the second in the three part webinar series will bring together a panel of experts to discuss how banks and financial institutions are evolving their service offering while simultaneously staying one step ahead of the cyber criminals who seek to bring their operations crashing to the ground.