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Winnipeg Free Press - PRINT EDITION
RIM delivers some grim news
-- Phone maker sees first operating loss in 9 years -- Blames woes on nosedive in sales
Research In Motion Ltd. appears to be aggressively pursuing a sale of the company, saying a nosedive in smartphone sales likely has led it to both its first operating loss in nine years and a wave of coming job cuts.
Shares of the BlackBerry maker were halted in after-hours trading on Tuesday as chief executive Thorsten Heins provided a written business update indicating the company would suffer an operating loss in the first quarter of its fiscal 2013 year, its first since fiscal 2004.
Shortly after Heins' update, RIM stock resumed trading and by 5 p.m. it had plunged 11 per cent and dropped below $10 a share to trade at single-digit levels for the first time in more than eight years.
Heins said RIM has hired JPMorgan Securities LLC and RBC Capital Markets to "assist the company and our board of directors in reviewing RIM's business and financial performance," and consider the merits of various options including "strategic business model alternatives."
The move comes after the company said during its year-end conference call on March 29 it was conducting a strategic review, which many observers took to mean the Waterloo, Ont.-based company was for sale, whether as a whole or in pieces.
At this point, however, even a sale might not be a solution, said Colin Gillis, an analyst with BGC Partners in New York.
"While I don't rule that out, and they're certainly being clear by hiring bankers, there are a couple of things (that could impede a sale)," he said.
Gillis pointed to RIM's 52-week high of $43.24 a share a year ago, which could be a barrier to the board approving a sale at a much lower price. Regulatory hurdles to the sale of a "Canadian national jewel" also could be difficult to scale, he said. Apart from the possibility of a takeout, he said, the company is faced with the problem it no longer looks like it is in the midst of a "transition."
RIM has struggled with a rapid drop in its market share as consumers flock to Apple Inc.'s iPhone and Android devices such as the Samsung Galaxy, and with a huge buildup in inventory.
The value of the company's in-house supplies grew 18 per cent last quarter, a faster rate than any other company in the industry, according to data compiled by Bloomberg. That figure doesn't include products still on the shelves at RIM's carrier and retail partner outlets.
Heins referenced that erosion in sales in his remarks, blaming the "ongoing competitive environment" for lower volumes and noting, "we expect our Q1 results to reflect this and likely result in an operating loss for the quarter."
He said the company expects to increase its cash position from the $2.1 billion it had at the end of its fiscal 2012 year, but added there would be "significant spending reductions and head-count reductions (in) some areas throughout the remainder of the fiscal year."
RIM has referred to these cuts -- part of a plan to save $1 billion by the end of its current fiscal year -- in response to media reports over the weekend it will lay off at least 2,000 workers out of its current workforce of about 16,500.
Heins did not say which jobs were in jeopardy, but did say the company plans to "continue to spend and hire in key areas such as those associated with the launch of BlackBerry 10 and those tied to the growth of our application developer community."
-- Postmedia News
Republished from the Winnipeg Free Press print edition May 30, 2012 B4
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