RIM to cut 5,000 jobs, delay OS

TORONTO - Shares of Research In Motion (TSX:RIM) are a beating today as investors react the BlackBerry-maker's dismal earnings results and another delay its new smartphones.

Shares in RIM fell 20.4 cent, or $1.92, to $7.54 in morning trading the Toronto Stock Exchange.

The Waterloo, Ont.- company also said it would lay a third of its workforce — or about 5,000 employees — to contain costs as it pushes with a complete revamp of the BlackBerry operating .

The announcements as a shock because the company insisted it would release new phones by the end of this year.

The company, reports in U.S. dollars, posted a loss of US$518 million or 99 cents per share its latest quarter, steeply missing analyst expectations.

The results marked a decline the profit of $695 million or $1.33 per share a year ago.

Chief executive Thorsten Heins told analysts a conference call that he expects the company will face pressure on its financial results the next several quarters.

The new BlackBerry 10 operating system and phones widely been considered a last-ditch effort save the company, which has lost a significant portion of marketshare competitors like Apple's iPhone and devices using Android operating system.

At one analyst questioned how RIM could successfully execute the release of new phones amid mass layoffs.

"We think execution risks will continue RIM plans to lay off 5,000 of its 16,500 employees by February at the same time launching its most pivotal product the company's history," Jeffries analyst Peter Misek said in a note clients.

"We believe the BB10 pushout decision was recent and leaves RIM with inferior products in increasingly competitive and saturated smartphone market."

Rumours have circulated months that a potential buyer could swoop and pick up the company, and nobody appeared to be interested, questions emerged whether Heins would decide to put a chunk of RIM up sale — most likely its struggling hardware division.

Heins has repeatedly said that selling the company is from his mind.

Misek said he believes it's unlikely RIM will bought before the launch of BB10 and lowered the target price the stock — which he rates underpeform — to $5, down from $10.

Another analyst questioned if BB10 would see the of day.

" this point there is a chance we may never see a BB10 handset given RIM’s track record," wrote National Bank analyst Kris Thompson a note.

"RIM is intent launching a 'distinct' smartphone platform; all we see at this is an extinct platform. Are consumers and enterprises really going to wait another platform? No!"

Thompson upgraded his shares to a "sector perform" the basis that the company could be broken and sold for $8 per share, based its cash holdings and intellectual property.


Adapted and abridged from: canadianbusiness.com, June 29, 2012.