On the back of poor results (again) RIM hangs 10 on the release of its next operating system (again)
RIM has once again delayed the launch of its long awaited operating system, BlackBerry 10, which should have been in the market later this year.
Following another set of bad results last Thursday, the company also stated that difficulties in the integration of major features of the new platform means the first smartphones running BlackBerry 10 will not be seen until the first quarter of 2013. RIM's share price dropped by 19.06% late last week, closing on Friday at $7.38 and valuing the company at $3.85 billion, down 75% from its value one year ago.
However, amid terrible first quarter results for RIM and the once again delayed operating system, the business is still pinning its financial recovery on BlackBerry 10, which it is calling 'a ground breaking next generation smartphone user experience'. Thorsten Heins, RIM president and CEO, said: 'Our top priority going forward is the successful launch of our first BlackBerry 10 device, which we now anticipate will occur in the first quarter of calendar 2013.'
Malik Saadi, principal analyst at Informa Telecoms & Media, commented on RIM's results: 'RIM is gambling on the launch of its forthcoming BlackBerry 10 operating system to redress the situation. However, the ongoing delay in launching the platform is not going to be in the favour of the company given its current bad performance. The analyst community does not doubt the capabilities of such an operating system, but this is not enough to help the company redress the situation. Bear in mind that 100% of the 78 million current BlackBerry users are still using legacy devices, so upgrading all these users to BlackBerry 10 will not happen overnight and RIM might well lose a great number of these users in the process. Worst, is the fact that the launch of the platform is now postponed to the first quarter of 2013 calendar year.
'To make it up for this anticipated loss of users, RIM should really consider licensing BlackBerry 10 to other device vendors and extend the reach of BlackBerry services to beyond its own portfolio of devices,' continued Malik. 'This will enable RIM to target a wider audience and unlock new market opportunities in both the consumer and the enterprise segments, allowing the company to reinvigorate its position as a leader in delivering a premium customer experience and reliable and secure messaging services.'
In its first quarter results report, the business stated that its software development teams have made progress on the key features of BlackBerry 10, but the integration of these features and the associated large volume of coding required to go into the platform has proven to be more time consuming than RIM first anticipated.
Heins commented: 'RIM's development teams are relentlessly focussed on ensuring the quality and reliability of the platform and I will not compromise the product by delivering it before it is ready. I am confident that the first BlackBerry 10 smartphones will provide a groundbreaking next generation smartphone user experience.'
Yet Malik said that with the delay in BlackBerry 10, investors should expect an ongoing bad performance from RIM, at least for the next three quarters. 'Now it is strongly questionable whether RIM can maintain its cash position during this period and execute its strategic plans without making some painful decisions of exiting parts of the market it services.
He added: 'It is becoming clearer than ever that the company needs to wave goodbye to hardware and focus more on delivering services and licensing software. This quarter's results have effectively confirmed that RIM can no longer afford to be a wholly vertical company with a fully integrated business model. From now on, any underperformance by the devices part of the organisation would mean a significant churn of current BlackBerry users, which could lead to the collapse of the whole business including services.'
RIM's results were a depressing moment for the already suffering business as devices failed to sell. Revenue hit a meagre $2.8 billion, down 33% from the previous quarter, where revenue was $4.2 billion. The first quarter was also down 43% from the $4.9 billion revenue in the same quarter of 2012. The business plans to make approximately 30% of its workforce, a total of 5,000 employees, redundant as part of its efforts to make $1 billion in cost savings.
Heins remarked: 'Our first quarter results reflect the market challenges I have outlined since my appointment as CEO at the end of January. I am not satisfied with these results and continue to work aggressively with all areas of the organization and the Board to implement meaningful changes to address the challenges, including a thoughtful realignment of resources and honing focus within the Company on areas that have the greatest opportunities.'