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RIM's grim earnings news should not put off enterprises

Matt Hamblen | June 17, 2011
If RIM can solve touch screen with coming QNX, it could resurface.

Minutes after Research In Motion on Thursday announced job cuts, delays in product shipments and a reduced earnings forecast, one of RIM's co-CEO's declared that it was still "fun" doing his job.

It was the kind of comment that has analysts and others scratching their heads over RIM, which has amassed strong devotion from enterprise IT managers for years even as it has struggled to attract consumers to its smartphones.

"I have a lot of respect for everything RIM has accomplished over the years, but going forward is another story," said independent tech analyst Jeff Kagan. "They seem to not get it. The comments coming from RIM worry me."

RIM's first-quarter results, announced Thursday, included several disappointments to Wall Street that sent the company's stock price tumbling by more than 15% after markets closed. Among the disturbing revelations:

  • BlackBerry smartphone sales saw the first quarterly drop since 2005, with 13.2 million sold in the quarter, down from 14.9 million in the previous quarter.
  • New smartphones running BlackBerry OS 7, including the Bold 9900, will debut late in the second quarter, missing the back-to-school sales period.
  • Phones running the new QNX operating system won't appear until early 2012.
  • A previous full-year earnings forecast of $7.50 per share was dropped to between $5.25 and $6 per share.

RIM said it would begin an undisclosed number of layoffs in the current quarter, which will end Aug. 27. It has about 17,500 workers.

One bright spot in the report was that 500,000 BlackBerry PlayBooks were sold in the first quarter, following the launch of the 7-in. tablet on April 19. RIM didn't give a date for when it plans to roll out a free update for native email for the tablet, which has been promised for this summer. Also, the release of the 4G version of the tablet with LTE, WiMax and HSPA+ has been delayed from this summer to this fall, RIM said yesterday.

Despite the grim news, co-CEO Mike Lazaridis declared RIM a "strong business" that is undergoing a transition to major platform upgrades.

When asked whether RIM is hurt by a co-CEO structure shared between Lazaridis and Jim Balsillie, Lazaridis responded: "We work very closely together, and I don't know where all these things are coming from. The thing you have to understand is that this is fun."

Several analysts defended RIM and its strong role in the enterprise but noted the company's product challenges and other missteps in a market that is crowded with successful tablets and smartphones running Apple iOS and Android.


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