Oh dear. RIM has released its year-end financials, and they don’t make for pretty reading. RIM had been reporting annual revenue increases for the past decade, although growth had slowed since 2008. It even managed to report slightly increasing profits for that period as well. All that changed last night with the release of its Q4 and Fiscal 12 end of year figures.
Revenue is down, profit is down, and sales are down. All this at a time when Apple doubled sales of its iPhone and Android continues its global domination. So much for BlackBerry competing with consumer smartphones. Time for new CEO Thorsten Heins to adopt a ‘bold new strategy’ – or ‘last ditch attempt to salvage the company’, whichever you prefer (see TelecomTV’s accompanying analysis today).
Revenue for the year was $18.4 billion, down 7 per cent from $19.9 billion in 2011. Net income was $1.2 billion, compared with $3.4 billion the previous year. The fourth quarter results showed that this downwards trend is in fact getting worse; revenue was down 19 per cent on Q3 to $4.2 billion, and there was a quarterly loss (its first in recent history) of $125 million. Shipments of new BlackBerrys were down a whopping 21 per cent on Q3’s numbers to just 11.1 million units. Remember that RIM’s fourth quarter extended from December 3rd through to March 3rd, and so includes the majority of the Christmas sales period.
To be fair, the markets had seen it coming. Ever since the company took the arguably long-overdue decision to replace co-CEOs Mike Lazaridis and Jim Balsillie with Thorsten Heins in January, we were expecting the worst. Unfortunately for RIM, the actual results were more depressing than the markets had believed possible.
Wall Street analysts had aimed low and expected RIM to post revenues of around $4.6 billion and earnings of 82-83 cents per share. In the end, $4.2 billion and 80 cents surprised even the most pessimistic of pundits. Stock fell 8 per cent on the news. In a written statement to accompany the figures, CEO Heins explained:
“The business challenges we face over the next several quarters are significant and I am taking the necessary steps to address them. We are undertaking a comprehensive review of strategic opportunities including partnerships and joint ventures, licensing, and other ways to leverage RIM’s assets and maximize value for our stakeholders.”
As it figures out what the heck these “strategic opportunities” are, RIM expects continued pressure on revenue and earnings throughout the coming year, and as a result will stop releasing quantitative financial guidance (as it will no doubt miss them and the markets will react even more badly). But let’s not overlook the positives…
Heins claimed that the company now has over 1 million BlackBerry PlayBook customers, having shipped over 500,000 tablets in Q4. ‘Shipped’ is obviously not the same thing as customer sales, but the figure is higher than expected. No doubt a major factor here was the decision to slash the price to $300 to stimulate interest – although at what cost to profitability? The PlayBook is now cheaper than the Amazon Kindle Fire. Heins' verdict:
“I have assessed many aspects of RIM’s business during my first 10 weeks as CEO. I have confirmed that the company has substantial strengths that can be further leveraged to improve our financial performance.”
Well, that’s the easy part done then. According to Heins, these strengths are RIM’s global network infrastructure, a strong enterprise offering and a large and growing (but rather more slowly than before) base of over 77 million subscribers.
Oh, and the long-delayed (aka ‘troubled’) BlackBerry 10 platform, which is now due to appear sometime in the latter part of the year.
As part of the clear-up operation, Heins has engineered some executive causalities. Former co-CEO Jim Balsillie resigns from the board, and the company’s Software CTO David Yach and Global Operations COO Jim Rowan will now “pursue other interests”. In a lovely turn of pharse, RIM’s financial statement said that Rowan’s departure came after “an open dialogue on the future of global operations” – we know how well that turned out. RIM’s chair, Barb Stymiest, had the pleasure of wishing Balsillie a fond farewell (yeah, right):
“On behalf of the Board and everyone at RIM, I would like to thank Jim for his 20 years of service to RIM. His energy, drive and enthusiasm helped build one of the most successful technology companies of our time.”
However, Lazaridis remains as vice-chair with responsibilities for technological innovation (yes, the man who a year ago insisted that RIM’s problems were overblown and the creation of an Apple-obsessed media, and who famously threw a wobbly during at interview with the BBC). So not a complete break with the past then… Canada’s Globe and Mail newspaper was told by a source that many other SVPs and VPs were being laid off.
During his first conference call with analysts, Heins said that RIM would streamline its highly corporate and complex workplace culture that is “not conducive to the efficient operation of our business”. He also cited “a lack of accountability” as a factor in RIM’s slow-motion car crash. RIM’s stock price sank more than 75 per cent during the last year.
Commenting on RIM’s quarterly earnings announcement, Victor Basta, director of technology M&A specialists Magister Advisors said that despite RIM’s new focus on operational improvements, the real issue is fundamentally strategic: “why should RIM exist when all other smartphone makers are developing better products faster?”:
“Under their new leadership, RIM spends billions on R&D, but they consistently deliver me-too products and are outpaced in a market that demands innovation. RIM has already lost the consumer battle and its main asset is its enterprise customer base, so retrenching to a corporate-only focus makes sense. In our view they should sell the company while that corporate customer base remains intact.”
He claims there would no shortage of logical potential buyers, whether from enterprise mobility specialists (e.g., SAP, Sybase) or from those with a strong interest in the device marketplace (e.g., HP, Huawei). The current strength of valuations in the mobile sector would certain appeal to RIM’s shareholders.
Here’s the scope of RIM’s problems in the North American market. According to a Nielsen report issued yesterday, Android represents 48 per cent of new handsets bought in the US, with Apple close behind at 43 per cent. RIM lies in a distant third place, with a mere 5 per cent.
Here’s another example. Whilst reporting from the ITU Telecom World event last October, I read a tweet that said something along the lines of “wow, amazing interest in the BlackBerry stand here at ITU”. Now, considering the exhibition area was as quiet as a grave, I had my doubts. A quick search discovered that the tweeter was a BlackBerry employee from Ontario, and a quick walk round to the stand resulted in the accompanying photo at the top of this report of a less-than-busy booth. Steve Jobs was described as operating within a reality-distortion field. What the heck was RIM's excuse?
So, one way or another, the RIM as we know it has gone. The RIM of the future – if indeed there is a RIM at all – is still something of an unknown quantity. If you have any suggestions, I'm sure Mr Heins would love to hear from you.
With apologies to 1920s composer Ray Henderson and lyricist Mort Dixon, we leave you with a classic tune that Jim Balsillie is no doubt whistling today. Pretty soon he’ll be able to form a whole choral society…
Pack up all my care and woe,
Here I go,
Bye bye BlackBerry.
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