Toronto - Struggling BlackBerry maker Research In Motion Ltd said on
Thursday it will delay the launch of new phones deemed critical to the
company's survival and revealed its business is crumbling faster than
thought.
The Canadian company posted results for its latest
quarter that were worse than analysts had expected. It's cutting 5 000
jobs and unexpectedly delaying the launch of its new phone operating
system, BlackBerry 10, until after the holiday shopping season.
After
several delays, the first phone with BlackBerry 10 was expected later
this year. It will be delayed even longer, to the first quarter of next
year, RIM CEO Thorsten Heins said.
The delay comes as North
Americans are abandoning BlackBerrys for iPhones and Android phones.
Analysts have long said the new BlackBerrys will come out too late to
reverse RIM's fortunes. RIM was banking its future on the new BlackBerry
10 system, which is meant to offer the multimedia, internet browsing
and apps experience that customers now demand.
Now it will come
out months after a new iPhone is expected to be released. Current and
previous iPhones have made the BlackBerry look ancient.
Workforce reduction
Heins
had vowed to do everything he could to release BlackBerry 10 this year
but he said on Thursday that the timetable simply wasn't realistic. He
said RIM's top priority remains a successful launch of the new
BlackBerrys.
"I will not deliver a product to the market that is
not ready to meet the needs of our customers," Heins said on a
conference call with analysts. "There will be no compromise on this
issue."
The jobs cuts are part of a previously announced
initiative to cut $1 billion in annual costs this year. They represent
about 30% of RIM's workforce of about 16,500.
"It is necessary to
change the scale and refocus the company," Heins said. "I fully
understand the impact a workforce reduction of this size has on our
employees and the communities in which we operate. I assure you that we
wouldn't move forward with a change of this size if we didn't think it
was critical for our future."
RIM shares tumbled $1.27, or 14%, to
$7.86 in extended trading, after the release of the results. If they
hold that level into regular trading Friday, they will set a nine-year
low.
Heins acknowledged that he delivered "a lot of tough news."
Challenging
"This
was a challenging quarter for the company on many fronts," he said.
"And I am not satisfied with the financial performance we are reporting
today."
He said the company will release fewer models than in the
past. He also said RIM will launch a BlackBerry 10 model with a physical
keyboard close to the launch of a touch-screen model. RIM earlier said
it would come out with the touch-screen model first, but didn't say when
it would make one with a physical keyboard, a feature that many people
stay with BlackBerrys for.
RIM has hired a team of bankers to help
it weigh its options as it loses market share and its business erodes.
Heins said they continue to study those options, but he declined to
elaborate and said the board would have to approve any changes.
RIM
lost $518 million, or 99 cents a share, in its fiscal first quarter,
which ended 2 June. That compares with a profit of $695m, or $1.33 per
share, a year ago.
Excluding impairment charges, the latest loss
was 37 cents per share. Analysts polled by FactSet were expecting a loss
of 3 cents.
Revenue fell 43% to $2.8 billion, well below analyst expectations at $3.1 billion.
Rapidly changing sector
RIM said it shipped just 7.8 million BlackBerry smartphones in the quarter, down 41 percent from 13.2 million a year earlier.
Heins
said the company is expecting the next several quarters to be "very
challenging." He said RIM is in the midst of a platform transition and
faces an increasingly competitive environment. Research firm IDC says
BlackBerry's US market share has plummeted from 41.1% in 2007 to 3.6% in
first three months of 2012.
Colin Gillis, an analyst with BGC
Financial, said the results and news of a BlackBerry 10 delay is far
worse than the horrible news he had already expected. He said the worst
quarters are still in front of RIM and management is not reducing
expenses fast enough to compensate for the revenue decline. He expects
this to be the last quarter that RIM will see subscriber growth and said
he would not be surprised if RIM announces more layoffs by the end of
the year.
"When a technology gets old, it's not a slow fade. It's a
sharp cliff," Gillis said. "There is very little market for old
technology."
Michael Walkley, an analyst with Canaccord, called
the BlackBerry 10 delay dire and problematic in a rapidly changing
technology sector.
"The biggest disappointment is the delay of the
BlackBerry 10," he said. "It's extremely challenging for them to turn
around the business when their new smartphone is launching that late."
- AP