Market Insight

Dark days for RIM with further losses likely

April 01, 2012


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Blackberry maker RIM reported its fourth quarter results, featuring its first quarterly loss in nearly nine years. Revenue dropped 19 per cent from the previous quarter to $4.19bn and led to a $125m net loss. Shipments of Blackberry smartphones dropped to 11.1m units; the lowest in two years.

New CEO Thorstein Heins responded by stating that the company will refocus on its core enterprise base. Three executives are also leaving the company; its COO and CTO are departing and former co-CEO Jim Balsille is resigning from the Board of Directors.

The headline numbers do not tell full story of RIM's struggles. More tellingly; the average selling price of a Blackberry smartphone has dropped 15% since the same quarter last year. Combined with the drop in shipments, this has led a 30 per cent quarter on quarter drop in device revenues. Services and software which typically have made up 21 per cent of revenue over the last two years jumped to 32 per cent of revenue in this quarter.

The bad news for RIM is that more losses are likely over the next year as it prepares to launch the new version of its OS; BlackBerry 10. This is expected to launch in late 2012, but no firm date has been given. RIM was keen to point out in its financials that it has $2.1bn in cash on hand, so the company will be easily able to weather the storm in the short term at least. However, if BlackBerry 10 fails to jump start RIM's sales, the long term future looks very bleak indeed.

 

The decision to refocus on its core enterprise customers is RIM's best strategic play at the moment. With its services becoming a greater part of its revenue stream, securing this against iPhone and Android encroaching into the enterprise space is paramount in the short-term. As the BlackBerry brand is waning as a consumer brand anyway; IHS Screen Digest believes that RIM is hoping to get consumers enthusiastic about BB10 by getting hands-on experience through an enterprise device. However this strategy may distance RIM from emerging markets such as Indonesia and South Africa where it has actually seen good growth.

While BB10 essentially remains RIM's last shot at reclaiming a strong position in the global smartphone market, its recent track record on execution does not bode well. Aside from the highly publicised email server crash in 2011, its tablet, the Playbook was released without email support and several other features in April 2011. Upgraded software was promised in the summer of 2011, but this only arrived in February of this year. RIM has yet to release an LTE compatible device for the North American market which may see its phones not getting ranged by certain operators. BB10 itself has also been delayed.

With so much is riding on the BB10 launch, coupled with RIM's cash, IHS Screen Digest believes that any takeover or part-sale of the company is unlikely to happen before the end of the year. If BB10 is further delayed, is shipped incomplete, or fails to spark sales then a sale of all or part of the company becomes very likely.  

 

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