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The death spiral of Research in Motion (s rimm) appeared to accelerate Thursday as the device maker reported a huge miss in its quarterly earnings and said that its savior platform, BlackBerry 10, will not be ready until next year. The new operating system was supposed to debut at the end of this year, but the news now means RIM will lose yet another cycle and miss out on big holiday sales.
The company also announced 5,000 job cuts as it tries to trim costs. That’s a 30 percent cut of RIM’s workforce of 16,500 employees as of March. But the bigger news is the delay of BlackBerry 10. The company has been struggling through delays of previous products and can’t quite seem to get its act together. This new delay will only give rise to more concern that RIM is finished and won’t be able to mount a comeback against Apple (s aapl) and Google (s goog).
In the same month in which Apple showed off iOS 6 and Google debuted Android 4.1, the last thing RIM wanted to do was announce that BlackBerry 10, which is based on its QNX platform, wouldn’t make it to market on time. The company is saying it will now appear in the first quarter of next year. I don’t know how RIM survives this and it really does make you wonder how much urgency the company feels in making this turnaround.
The company announced that revenue came in at $2.8 billion in Q1, a 33 percent decline from $4.2 billion from the previous quarter and a 49 percent decline from the same period last year. RIM posted a loss of $518 million or $0.99. Even excluding special items, RIM’s adjusted loss was $192 million or $0.37. Both figures blew past the expectations of analysts, who were expecting revenue of $3.1 billion and a loss of 3 cents per share.
RIM had shipments of 7.8 million BlackBerry smartphones and shipped 260,000 BlackBerry PlayBook tablets. That continues a downward trend from the previous quarter in which RIM moved 11.1 million smartphones.
RIM’s CEO Thorsten Heins said on a conference call the delay to BlackBerry 10 came about because the task of integrating so much code for the new operating system proved to be a more difficult than previously thought. Heins said he was committed to delivering a high-quality product and was set on not pushing ahead prematurely.
“I will not deliver a product to the market that is not ready to meet the needs of our customers,” he said. “There will be no compromise on this issue.”
But he admitted the next few quarters would be challenging as RIM weathers the platform transition. That’s an understatement. RIM will have to keep pushing BlackBerry 7 devices, trying to convince existing users to upgrade now instead of waiting for the even better BB10. New users will also get hit up but with so many great option in the market available now from Apple, Google and even Microsoft, it’s a tough sell jumping on to a dying platform when you can buy something state of the art.
But even selling those devices will continue to hurt the bottom line because the average selling prices keep dropping. Next year, BlackBerry 7 devices will serve as entry and mid-level devices with BB10 taking premium customers. But it’s hard now to command a premium on devices that will be obsolete soon.
Heins believes the company can emerge from its 5,000 person restructuring leaner, but that’s what every CEO says. The trick will be to get the remaining people to really operate at a faster pace. There isn’t any sign, however, that RIM is capable of executing at a quick rate.
There was some slim hope that RIM could turn things around with BB10, which inspired cautious optimism from my colleague Kevin. But as I’ve mentioned before, RIM doesn’t seem to operate with enough urgency. Even if it delivered BB10 this year, the road would have been extremely tough with so many people voting with their feet away from the BlackBerry platform. But now the chances of getting back in the game as a full hardware player are even more challenged. My colleague Kevin predicted this year that RIM would be purchased mainly for its patents or would refocus as a services-oriented entity. That is looking more and more likely now with each passing quarter.