The intense competition in the Smartphone market is keeping the manufacturers on their toes. For one manufacturer, however, this war to outsmart and "out-market" other players is coupled with a confounding battle for survival. Research in Motion Limited (RIM) - the maker of the famed and sophisticated BlackBerry mobile handsets - is in the midst of a crisis it is struggling to get to grips with.
The liquidity crunch makes the core of RIMs woes. The marked deterioration in the Companys cash flows in recent years is predominately due to falling handset sales, as the competitive landscape is being dominated by Apples iPhone and Android-powered Smartphones from a variety of manufacturers. Soaring operating costs and higher marketing expenditures have also contributed to the cash shortfall.
A glimpse of the Companys falling out with the investors can be seen in nearly 75 percent erosion in the RIMs stock value on Nasdaq in 12 months upto June 29, when the stock closed at $7.39.
The gloom and doom scenario exacerbated last week when the Company announced its 1QFY13 results. (RIM closes its financial year on March 2). A quarterly net loss of $518 million exceeded analysts expectations five times over, even as sales plunged by nearly a half to settle at $2.8 billion for the quarter.
RIM reported a nominal, $100 million increase in cash and cash equivalents, and short-term and long-term investments over preceding quarter. Yet this failed to calm the investors as the stock shed nearly one-fifth of its value on June 29 following the quarterly announcement a day earlier. That the new BlackBerry 10 phones won hit the markets before January 2013 (an unexpected delay) must have fuelled frustration.
Meanwhile, analysts on the Wall Street in New York and the King Street in Toronto sound somber at best and panic-stricken at worst. "The (BB10) delay may just be the final nail in the coffin. This is not just a disappointing quarter, but is a big question mark about the Company going forward," Bloomberg News quoted a Toronto-based analyst on Friday.
No solace is offered by RIMs market position, either. Companys shipments of Blackberry handsets declined by 41 percent to reach 7.8 million in 1QFY13, and its PlayBook tablets shipments nearly halved during the quarter to 260,000. "They either sell and break up the Company or die. My view is that things get so bad this year and in early 2013 that they get forced into a sale," warned another analyst.
Thorsten Heins, RIMs President and CEO, is tight-lipped on the much-awaited strategic review which was commissioned to JPMorgan Chase earlier this year: to evaluate "strategic options". These options might include selling an equity stake, licensing the BlackBerry operating system to third parties, or even an outright sale. Reportedly, firms like Microsoft and IBM are eagerly waiting for RIMs final announcement.
To reassure the shareholders and the 78 million BlackBerry subscribers, Mr. Heins - who assumed RIMs leadership position in January this year - has signaled some rethinking. Acknowledging his dissatisfaction with these results, he announced in his statement in the latest quarterly report to cut 30 percent jobs in the 16,500 strong workforces and vowed to realign resources and optimise costs.
The firm is facing mounting operational and competitive pressures, but the CEO sounds upbeat. He seems to be banking on the successful launch of BlackBerry 10 device in early 2013, and culmination of the ongoing strategic review to spell the way out. He counts the large numbers of BlackBerry subscriptions, enterprise base and unique network architecture as RIMs leverage-able strengths. But, its a bit premature to tell whether he will have time on his side!