Analysis

Winnipeg Free Press - PRINT EDITION

Only Research In Motion can save Research In Motion

By: The Waterloo Region Record

Posted: 07/6/2012 1:00 AM | Comments: 0

Forget about patriotic Canadian consumers or exorbitant taxpayer bailouts. They won't keep this high-tech giant alive however hard they try or however much they spend. The threats confronting RIM from around the planet are simply too great and its problems too profound.

The only treatment that will work is aggressive, decisive and, for the 5,000 RIM employees worldwide who will lose their jobs, painful action by the Waterloo-based company itself. RIM chief executive Thorsten Heins has reached this unavoidable conclusion and, as he explained July 3, is prepared to take such action because it is necessary.

For people in Waterloo Region, it will be unnerving to watch RIM perform what is supposed to be life-saving surgery on itself. RIM started here. It established this community as a global centre for high technology while, in the process, making it richer and more vibrant.

It's awful to think of the 2,500 to 3,000 people who work for RIM in this region who will lose their jobs in the coming months. The hopes and dreams of these people as well as those of their families will take a beating. Local businesses will feel a pinch, even though the region's economy overall remains strong.

But today, the company's very survival is in question and there seems no real alternative to what Heins has proposed. Last year was disastrous for RIM. This year is as troubled. In the last quarter, the company lost $518 million -- compared to the $695 million it earned in the same period in 2011.

The problem, in a word, is sales. They're falling. While RIM shipped 7.8 million BlackBerry smartphones in the last quarter (March through May), that was a sharp drop from the 11.1 million it shipped in the previous quarter. When will the hemorrhaging stop?

The competition, especially Apple, is increasingly squeezing RIM in the vital market that is the United States. Meanwhile, RIM admitted last week that it was, for the second time, delaying the release of its pivotal BlackBerry 10 smartphone and operating platform. The long-promised game-changer that was originally supposed to be on store shelves at the start of this year won't be ready for public consumption until early 2013. And many consumers will wonder if they'll even see it then. No wonder the value of RIM stock has been gutted in the past year.

In this context, what Heins is responding to is the inevitable consequence of unsustainable growth amid diminished returns. When Heins joined RIM in 2007, it had 6,532 employees. But it grew like wildfire, and even by the time of the latest round of layoffs, it had, along with sliding sales, 16,500 workers globally. The cuts announced by Heins will still leave RIM almost twice the size of what it was just five years ago. But it will be more viable.

Such words offer no consolation to those whose lives are being disrupted and turned upside down by layoffs. But what alternatives are there? Waterloo Mayor Brenda Halloran expressed an understandable sentiment last week when she urged Canadians to rally around RIM by buying its products. It's hard to quarrel with her recommendation, but it won't fix RIM. Only four per cent of its revenues come from Canada, while 25 per cent come from the United States, nine per cent from Britain and 62 per cent from outside North America and Britain.

It's all brutally simple. RIM needs to sell more BlackBerrys. To do that, it needs to bowl over consumers with a new generation of smartphones that will perform beyond the capabilities of the products now on the market. To deliver that, it needs time. Heins is buying RIM that time through a slashed company payroll. It is a grim necessity. We can only hope it works.

Republished from the Winnipeg Free Press print edition July 6, 2012 A12

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