|RIM's Tough Transitions ... |
... to new products and new OS.
>> >> Analysts Slash RIM Stock Target, See ‘Painful Transition’
Globe and Mail Update
Published Wednesday, Jul. 27, 2011 7:44AM EDT
Last updated Wednesday, Jul. 27, 2011 10:51AM EDT
UBS downbeat on RIM
Analysts at UBS Securities Canada have slashed their price target on shares of Research In Motion Ltd. (RIM-T24.82-1.04-4.02%), citing its fight against Apple Inc. (AAPL-Q397.13-6.28-1.56%) and Google Inc. (GOOG-Q613.44-9.08-1.46%) and what it sees as "painful transition."
RIM stock appears cheap, but analysts Phillip Huang and Amitabh Passi said they continue to "lack visibility into normalized earnings power." They cut their 12-month target on the stock to $30 (U.S.) from $41 and held their rating at neutral.
The two analysts added they continue to see challenges in the operating platform battle with Apple's iOS and Google's Android, and, possibly, Miscrosoft Corp. next year as it teams with Nokia Corp.
The planned introduction of its new devices - RIM says it has several in the pipe - could turn the tide, they added, though it may be next year, and a new platform, before there's a "more meaningful transition."
The analysts also cut their profit estimates for RIM's 2012-2013 fiscal year.
"We still see much uncertainty in the outlook of the company particularly as it transitions to QNX (its new platform) in 2012 and as the competition between BlackBerry, Android, and iOS intensifies," they said.
"Adding to the platform wars is likely a concerted effort by [Microsoft-Nokia] in 2012 as well. With increasing reports of deteriorating morale and no fundamental changes to senior management (many largely intact and with expanded responsibilities), we continue to see a company undergoing a painful transition, with no fundamental change evident."
RIM has promised better times ahead. And earlier this week, it shuffled some management positions and announced plans to cut 2,000 jobs. ###
>> RIM Shrinks Work Force As Rivals Gain Ground
Omar El Akkad & Iain Marlow
Globe and Mail
Published originally Monday, July 25, 2011
After quadrupling the size of its work force in the past five years, RIM said Monday it will undergo the biggest round of layoffs in its history in an attempt to improve its financial performance after months of product delays, disappointing quarterly earnings and a flagging share price, which has dropped more than 55 per cent this year.
However, the move to cut staff is still at best a short-term measure while the smart-phone maker tries to solve its fundamental problem: an inability to attract consumers to its BlackBerry devices in the same way competitors such as Apple Inc. and Samsung Electronics Co. Ltd. have done.
“It’s long overdue,” Queen’s University School of Business professor John Pliniussen said of the job cuts. “It should have happened six months ago.” But he added that RIM’s survival continues to hinge on its ability to gain back customers with a slew of mobile devices set for release this year, and then an entirely new line of powerful gadgets running on a new operating system, called QNX, next year.
“That’s the missing piece: Making us excited again about what RIM stands for,” Prof. Pliniussen said.
For months, RIM’s top executives have dismissed long-term concerns about the smart-phone maker’s future, claiming the company was simply going through a difficult “transition period” as it shifts from traditional BlackBerrys to a more powerful generation of high-end phones.
But Monday’s announcement that the Waterloo-based technology giant is cutting more than 10 per cent of its work force dealt a surprising blow to the Canadian tech sector. Investors and analysts have been expecting layoffs for some time, although few expected job losses of this magnitude. RIM had indicated the cuts were coming earlier in the year, as part of a larger effort to cut back on “non-core” operations. It is unclear whether RIM will also move to outsource more of its manufacturing operations to cheaper regions in order to cut costs.
In addition to the layoffs, RIM announced a number of changes in its executive ranks. Chief operating officer (product and sales) Thorsten Heins will oversee all product engineering functions at the company. Chief information officer Robin Bienfait will also take on responsibility for the business enterprise unit. Chief operating officer (operations) Jim Rowan and chief financial officer Brian Bidulka will oversee the cost-cutting program. The job descriptions of the co-CEOs appear to remain unchanged.
Paul Taylor, the chief investment officer for BMO Harris Private Banking, said RIM’s management had prepared the Street for layoffs, but that it was still a shock to see that many high-paying jobs disappear from an important sector. But like other investors, he says he’s still waiting to see fresh products, and that the Street will be waiting anxiously to see what the take-up is by the middle of November.
“Really, they can shuffle all the chairs they want on deck, at the end of the day, do they have a competitive product suite?” asks Mr. Taylor, who oversees $14.5-billion in assets, including RIM shares.
“We, like everyone, will watch very carefully. Really, there’s no news. At this point in time, no press releases, no shuffling of co-chair or co-CEO responsibilities, no layoffs” will amount to a turnaround strategy, he added, since “the litmus test for this company is, do they have market-competitive smart phones?”
Employees in North America and elsewhere will begin receiving their pink slips and severance package details this week. Although RIM will not yet say which areas will see the most cuts, it’s a safe bet at least some jobs will go at the company’s sprawling Waterloo facilities, where RIM still serves as the anchor of Canada’s most important technology centre. Indeed, RIM and its founders have played an instrumental role in developing the city’s technology credentials, from millions of dollars in donations to the University of Waterloo, to the development of world-class research institutes.
RIM has about 19,000 employees worldwide, 9,000 of which are in Waterloo.
Ironically, RIM’s investment in Waterloo helped shine a light on the engineering talent in the area, drawing powerhouses such as Google to build a large presence in the area. With RIM shedding jobs, it is likely that more of that talent will flock to those competitors.
“Waterloo has been our main development centre in Canada,” said David Lawee, Google’s vice-president of corporate development, who oversees the company’s acquisitions strategy. “The talent is phenomenal. The people are phenomenal.”
In a testament to RIM’s importance in Waterloo, within hours of the layoffs announcement, Communitech, an organization representing 800 tech companies in the region, issued a statement expressing “absolute confidence in the continued growth and success of Research In Motion.”
Investors will get a more detailed breakdown of the layoffs during RIM’s next quarterly earnings call on Sept. 15. Between now and then, the Canadian smart-phone maker is expected to launch several new products, the success or failure of which will likely have far more impact on RIM’s future than the current round of cost-cutting. ###
>> RIM Has ‘Faced Some Challenges,’ Balsillie Concedes
Omar el Akkad & Julien Russell Brunet
Globe and Mail
Published Tuesday, July. 12, 2011
Hundreds of investors descended on Research In Motion’s annual general meeting in Waterloo, Ont., on Tuesday in search of answers to concerns that have tormented Canada’s most important technology company for months – concerns about marketing savvy, product delays and even the focus of senior management.
But even in the face of a tumultuous year in which RIM’s (RIM-T24.52-1.34-5.18%) value was sliced in half, co-CEOs Jim Balsillie and Mike Lazaridis struck a confident pose. Amid a series of questions about the company’s sliding fortunes, the executives clung to the same narrative they have used for the past six months: The troubles are temporary, and RIM is poised to regain its position atop the market with a new line of products.
While Mr. Balsillie conceded the company has “faced some challenges,” there was little in the way of an explanation for how RIM has lost ground so rapidly to rivals like Apple and Google.
This is the first time shareholders have had a chance to voice their concerns directly to Mr. Balsillie and Mr. Lazaridis, who have faced considerable criticism over their management and direction of the company. Some analysts and investors have called for fresh leadership to turn the firm around.
While a great deal is on the line for RIM’s shareholders, much is at stake for the country’s technology industry and the economy as a whole. Since the death of Nortel Networks, the company has for the past decade anchored the sector – spawning startups, spending millions on research and development, and keeping some of the nation’s most talented engineers employed in Canada.
That role, coupled with the company’s presence in many Canadians’ investment portfolios, makes RIM’s health vital to the fortunes of much more than the thousands it employs. If RIM fails on the global stage, other tech companies are at risk of being dragged down with it – a collapse the country’s economy can ill afford as it inches out of recession.
RIM’s leadership might be sounding an optimistic note, but the company is facing a steep climb.
It has suffered through a storm of bad news that has shown no signs of letting up for the better part of a year. Profit warnings, product delays and calls for a management shakeup have seen its share price sliced in half since January. All the while, it has been losing ground to Apple and Google.
Earlier this year, RIM issued a warning that its second quarter results would be significantly weaker than expected – news that shocked investors and sent the company’s stock price plummeting. When RIM announced its earnings last month, it also announced a round of layoffs, sending shock waves throughout the Canadian technology industry.
Much of RIM’s trouble of late has come in the form of product delays, as the company has time and again pushed back the launch of its newest handsets. The new phones were expected to stop the bleeding as RIM prepares to transition to a an entirely new line of mobile devices in 2012 – devices that, the company’s co-CEOs hope, will turn RIM’s fortunes around.
In the meantime, RIM’s BlackBerrys continue to lose market share to Apple’s mobile devices, as well as devices powered by Google’s Android operating system. The trend is most pronounced in North America, where the bulk of high-end smart phones are sold.
As a result of its struggles, RIM has as of late been the subject of much investor and analyst criticism. The company barely avoided what would have been an embarrassing showdown over the way it structured its board by promising to form a committee to explore the topic – an investor group had earlier proposed a motion that would force the co-CEOs to give up their joint roles as co-chairs of RIM’s board of directors.
A number of other observers have also mused about whether RIM should bring a new management team on board – something current management opposes. Most recently, an analyst also suggested the company split its operations into two distinct areas – networking and handsets – so as to better concentrate on its core operations. ###
- Eric -