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Research in Motion, Maker of BlackBerry, in World of Trouble
A team of bankers has been hired by Research in Motion, the maker of BlackBerry, for consultation regarding its eroding as more and more users abandon their phones for iPhones and Androids. On Tuesday, the company issued a warning that it is losing money for the second consecutive quarter and will need to layoff a large number of employees. RIM is located in Waterloo, Canada, and has hired J.P. Morgan and RBC Capital Markets for help with its options. Those options include overhauling the company’s business, partnering with another company or licensing software.
The company did not talk about a sale but new Chief Executive Thorsten Heins did not rule out a sale after the earnings report from March was released. A BGC Financial analyst, Colin Gillis, said that the company is spiraling down without slowing. “Unfortunately, it falls into the too little, too late category,” Gillis said. “It doesn’t mean somebody won’t try it. It doesn’t mean it’s going to be a savior for the company either.”
The statement released from RIM did not discuss the layoffs except for saying that it expects “significant spending reductions and headcount reductions in some areas throughout the remainder of the year.” Close to 5,000 people could lose their jobs within the company even though 2,000 people lost their jobs in July. The company is trying to save $1 billion. The U.S. share of smartphones for RIM dropped to 10 percent in 2011 from 44 percent in 2009, according to NPD Group.
Across the world, there are still 78 million subscribers but Apple Inc., Samsung and HTC are swallowing up the market share very quickly.
“The on-going competitive environment is impacting our business in the form of lower volumes and highly competitive pricing dynamics in the marketplace,” Heins said in the company’s statement. When RIM publishes its first quarter results on June 28, Heins said the company will more than likely report an operating loss. Heins took over as Chief Executive at RIM when the company’s founder Mike Lazaridis and executive Jim Balsillie resigned when the company lost tens of billions of dollars.
RIM recently released phones with touchscreens that look like an iPhone but those phones have not been well-received by the market. The tablet released by RIM, the PlayBook, has also flopped on the market.
RIM was “the leader and this is what happens in the technology cycle of creation and destruction,” Gillis said. “They rode the first wave of the smartphone revolution and Apple is riding the next one.”
Research in Motion, Maker of BlackBerry, in World of Trouble by Jim Vassallo