Research In Motion Ltd. is under intense pressure to speed up the launch of its new BlackBerry device as a rapidly sinking market share is set to leave the company with an operating loss in its latest quarter.
As consumers and businesses continue to flock to Apple Inc.'s iPhone and devices running on Google's Android operating system, the BlackBerry maker said it expects more challenging quarters ahead and is taking steps to transform the company as quickly as possible.
RIM said it hired J.P. Morgan Securities LLC and RBC Dominion Securities Inc. to help with a previously established strategic review, which could lead to industry partnerships, licensing deals or even the outright sale of the company.
"The on-going competitive environment is impacting our business in the form of lower volumes and highly competitive pricing dynamics in the marketplace, and we expect our [first-quarter]results to reflect this," RIM chief executive officer Thorsten Heins said.
RIM's fortunes have deteriorated sharply over the past year or so as the company rapidly loses market share in the smartphone market. The expected operating loss signals that RIM's BlackBerry sales are falling even faster than many had expected, and that inventories of the devices are piling up in the sales channels of major telecom carriers, which resell them to consumers.
"RIM is seeing lower device volumes and is making very aggressive price cuts to preserve shelf space," Mark Sue, an analyst with RBC Dominion Securities Inc., said in a note to clients. "We expect RIM's financial performance will be challenging for the next few quarters."
As a result, analysts say the company must fast-track the launch of BlackBerry 10, its next-generation operating system and smartphones, ideally in time for the key back-to-school shopping season.
Kevin Restivo, a mobile analyst with IDC (International Data Corporation) advisory services, said BlackBerry must be a hit with consumers, business users and software developers alike.
"It needs to be a home run for RIM to reverse its current fortunes, and without it being in market that's not an option."
As a result, Mr. Restivo said the company must speed up its launch of BlackBerry 10, getting the device in consumer hands this fall. While conceding that such at timetable is likely overly optimistic, he notes that demand for BlackBerrys continues to tumble. "The floor of this business is being lowered by the month," he said. RIM's stock was down more than 7 per cent in after-hours trading on the Nasdaq.
RIM is scheduled to report its first-quarter results on June 28. In announcing the expected operating loss, Mr. Heins said the company is "going through a significant transformation" as it moves towards the BlackBerry 10 launch during the second half of this year.
He also reiterated the company's goal to achieve $1-billion in savings by the end of fiscal 2013. There is already speculation that RIM will have to resort to more layoffs, potentially as much as 12 per cent of its work force, in order to contain costs. The company had roughly 16,500 full-time employees as of early March.
RIM's global subscriber base has reached 78 million, but there is an accelerating decline in the company's core smartphone business, particularly in the United States. That, in turn, has fuelled worries that demand in emerging markets could also dry up down the road.
"It is fairly dire, but I think it shows the accelerating decline of their core business," Mike Abramsky, a principal at RedTeam Global, a strategic technology advisory firm, said of the company's expected operating loss.
"I think it just puts enormous pressure on them to address this quickly or face more difficult choices – which is probably why they are hiring bankers," he added.