Press Release: Research In Motion CEO Provides Business Update

RIM
By Adam Zeis on 29 May 2012 04:18 pm EDT
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As we saw earlier today RIM may have another inventory write down when they report their earnings later next month. This afternoon trading of RIM stock has been halted, which is a sure sign of big news as well. As noted in the release below, RIM has hired J.P. Morgan Securities and RBC Capital Markets to help with "strategic review" and "opportunities to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives."  This could mean RIM is finally looking to licensing their software or even be looking for a possible sale. More on this to come ... Update... see our follow up commentary here.

Press Release

WATERLOO, ONTARIO--(Marketwire - May 29, 2012) - Research In Motion Limited (RIM) (NASDAQ:RIMM)(TSX:RIM), a world leader in the mobile communications market, today provided a business update from Thorsten Heins, the Company's President and CEO.

"During the Q4 2012 and fiscal year-end financial results conference call on March 29, I said that I would provide our shareholders with candid and timely updates when possible on the progress and challenges RIM is experiencing. While we are no longer giving quantitative financial guidance, I wanted to provide a brief business update at this time, and will provide more details when our Q1 financial results for the quarter ended June 2, 2012 are released on June 28.

In terms of challenges, as I mentioned on the March financial results conference call, RIM is going through a significant transformation as we move towards the BlackBerry 10 launch, and our financial performance will continue to be challenging for the next few quarters. The on-going competitive environment is impacting our business in the form of lower volumes and highly competitive pricing dynamics in the marketplace, and we expect our Q1 results to reflect this, and likely result in an operating loss for the quarter. We are continuing to be aggressive as we compete for our customers' business - both enterprise and consumer - around the world, and our teams are working hard to provide cost-competitive, feature-rich solutions to our global customer base. On the positive side, we expect to further increase our cash position in Q1 from the approximately $2.1 billion we had at the end of fiscal 2012.

Despite the current challenges, we have made significant progress on a number of fronts in the past few months:

Our annual BlackBerry World conference and BlackBerry 10 Jam took place earlier this month and both were tremendously successful. More than 5,000 developers, partners, carriers and enterprise customers from 115 different countries saw the first glimpses of our next-generation BlackBerry 10 platform and their response was encouraging.

Our developer partners have been enthusiastic with the BlackBerry 10 Dev Alpha prototype unit we distributed at BlackBerry World and many are well underway in developing applications to be ready for the launch of BlackBerry 10 in the latter part of calendar 2012.

The support and enthusiasm from our developer community is also reflected in our app growth, where we now feature more than 80,000 apps, which represents a 220% increase from one year ago, and more than 15,000 apps for PlayBook compared to less than 2,000 last year. We believe this bodes well for our ecosystem as we get set to launch BlackBerry 10.

We are making steady progress with the innovation of our next-generation BlackBerry 10 mobile computing platform, which is still on track to launch in the latter part of calendar 2012.

Our global subscriber base continued to grow this quarter to approximately 78 million, driven primarily by growth in international markets, which is partially offset by high churn in the United States, and our BBM user base has grown to approximately 59 million users globally.

Our strong brand internationally was recently enhanced with the successful launch of two new BlackBerry 7 phones in India and Latin America.

We continue to make strategic changes to RIM's senior management team with the hiring of two key new members to RIM's executive leadership team. Kristian Tear, our Chief Operating Officer, whose background also includes extensive experience in international sales in Europe, Asia and Latin America, and Frank Boulben, our Chief Marketing Officer, who will provide our team with deep experience in the mobile computing and communications industry. Both will assist me and the existing executive team as we continue to make the organizational changes necessary to position RIM for the future and prepare for the launch of our new BlackBerry 10 platform.

The CORE (cost optimization and resource efficiency) program we told you about previously is focused on delivering key operational savings through various initiatives. The financial objectives for the CORE program are targeted to drive $1 billion in savings by the end of fiscal 2013, based on our Q4 run rate. We are targeting better efficiency and use of resources in our sales and marketing initiatives to effectively leverage marketing windows and evaluate our country portfolio to determine where it makes sense for us to prioritize our efforts. We will also continue to review RIM's organizational structure and clearly define accountabilities for all key businesses and business processes with a goal of eliminating fragmentation, duplication and inefficiencies. While there will be significant spending reductions and headcount reductions in some areas throughout the remainder of the fiscal year, we will continue to spend and hire in key areas such as those associated with the launch of BlackBerry 10, and those tied to the growth of our application developer community. We will share more details regarding our progress throughout the year as programs are implemented or changes are completed.

To further enhance our commitment to successfully completing our transformation, after the release of our year-end financial results, we engaged J.P. Morgan Securities LLC and RBC Capital Markets to assist the Company and our Board of Directors in reviewing RIM's business and financial performance. These advisors have been tasked to help us with the strategic review we referenced on our year-end financial results conference call and to evaluate the relative merits and feasibility of various financial strategies, including opportunities to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives.

Although we are facing challenges, we remain excited about BlackBerry 10 and believe that this platform coupled with the results of the strategic review will create long-term value for our stakeholders. We will provide another more detailed business update when we report our first quarter results in June."

Q1 Results Conference Call Details

RIM will be reporting results for the first quarter of fiscal 2013 on June 28, 2012 after the close of the market. The Company will discuss today's announcement and first quarter fiscal 2013 results on a conference call and live webcast beginning at 5 pm ET, June 28, 2012. The call can be accessed by dialing 1-800-814-4859 or at www.rim.com/investors/events/index.shtml. A replay of the conference call will also be available at approximately 7 pm by dialing 1-416-640-1917 and entering passcode 4501363#. A replay of the webcast will be available clicking the link above. The replay will be available until midnight ET July 12, 2012. The conference call will also appear on the RIM website live at 5 pm ET and will be archived at http://www.rim.com/investors/events/index.shtml.

Reader comments

Press Release: Research In Motion CEO Provides Business Update

55 Comments

Does anyone know if they actually can withhold financial/quantitative information being a publicly traded company? Or am I missing something?

Edit: Never mind. I missed the word "guidance".

Looks like I wasn't that far off on my earlier comments regarding a Q1 FY 2013 net income loss.

I might of interpreted the $1B in inventory as a full write down, but my projections of a net income loss due to lower unit sales resulting in decreasing revenues coupled with falling margins on hardware (~20%).

I think that RIM is still ways from licensing their software. But selling their hardware division, which is a huge contributor to their downside is possible.

I don't agree. There are other options that would be consistent with retaining RBC and JPM.

Selling out now is frankly nonsensical unless they can convince the buyer to offer more than double the current share price, and that's hard to fathom.

RIM is still profitable. It is continuing to grow user-base. It is INCREASING its cash position. It also has most of its stock held by its founders and a few key institutional investors, none of whom will be interested in selling at such a heavy loss.

Finally, they are on the verge of launching a promising new platform. If BB10 is a success, it will add considerable value to the company.

As sad as it all is to see, RIM needs to restructure. This is restructuring. Slim down, freshen up management, slash spending and focus on BB10.

Happy to see this day, I knew it was coming and it's ugly but it's likely going to lead to a re-birth of RIM and that can only good!!!

GO RIM!!!!!!!!!!!!!!!!!!!

That's one of many options...and being baught isn't nessasarilty a bad thng.

No company would aquire RIM prior to a major net new product release just months away. Let RIM Fail or Suceed under that stratgy and then make a move. Why would a third party take on the added responsibility?

Glad to hear the userbase is expanding...but it would be interesting to see the year-over-year change in the userbase distribution by global region...

Living in Canada, I have lost a substantial number of BBM contacts over the past year.

I have 7 people on my BBM list (down from almost 60 3 years ago)... Out of the 7 (2 of them don't count "Que viva and BeBold contest) then out of the 5 that are remaining 1 of them is myself. lol so 4 people.

The userbase is expanding only in absolute terms. In relative terms (i.e. market share) it's been rapidly decreasing.

Exactly. Of course their user base increases. I mean they are selling more phones each day so their user base is always going to increase. Who knows how many of these are actually new users and not existing bb owners though.

What is important however is that with market share slipping, they need to accept that this is the result of years of lack of innovation (or rather insufficient innovation), and they have to use the down-time to restructure and pull something out in the next 2-3 years.

Anyone who is expecting BB10 to be a smashing success and for RIM to launch into stardom once again is smoking something. The big market players have been named: Apple and Samsung. The rest will have to wait their day. And it will come. I just hope RIM hasn't already had theirs. That's why they should throw big bucks onto the Creatives within RIM and let them do the magic. I think BB12 will be a killer, "BB10 will barely be catching up with the competition". And mind you, those words are a direct quotation from an employee I know within RIM.

good to know that they are not depleting on their cash reserves..and also surprised their cash reserves are going up in-spite of the quarterly loss

They will be tied together, the quarterly loss will be because of the write down of the warehouses full of unsold blackberries and playbooks and this in turns increases the cash balance.

Supose Samsung did buy them. Supose Samsung offered nothing more than Stay profitable for the next three years. Allow BBM on all Samsung Phones and we will do your marketing, because obvioulsly you have no clue. Personally I think that would be a dream come true and might allow for a viable third or fourth ecosystem.
Cellcom Employee

Sounds to me like they are making difficult but necessary changes to insure the longevity of the company and the BlackBerry brand to me.

Boldly sent from my 9930

This is what we need from RIM during the months to the launch of BB10.

We need updates. Attention seeking analysts are B-lickers.

This is a refreshing change to see them address some rumours instead of letting others form the narrative. Good news to hear they haven't started to burn cash.

So Samsung is finally acquiring RIM? @zerohedge Endgame for RIMM: either it finds a buyer, or game over

If RIM ever got sold and was no longer Canadian, I'm out. BB10 or not, I'm tired sounding like the fool in the corner defending the company and telling others they should support a business that's based within the country.

My last leg to stand on is wanting a physical keyboard. Some Android phones offer that, so it's probably the way I'll go.

I love RIM as a company because they are not in the business of abusing my privacy or identity for $$$. I will never go to Android because it is owned by Google and Google's business model seems to me to exploit privacy and individualism for $$. IMHO, it is not good practice to give your money to a company where you are not their customer but the source of their revenue.

I can't believe what people are willing to give up for a few free Apps.

I'm with you eh. It going to be a difficult time for me when it does happen eh. Which I hope it doesnt

Obviously they are taking a charge in the next quarter, I assume that it's related to staff cuts. Secondly, they say they are exploring all options and that means partnerships and sales so there is nothing new there. It's kind of a non event when you consider they stated they were going to do this. They took a one time charge last quarter and they said they would this quarter, nothing new there. Time to buy.

They were looking for a banker, they got one, they are working on BB 10 as expected, cash is growing because they are taking a non cash charge so what's the big deal? Oh yeah, the media hates RIM, thank god Facebook came along ...............

"Oh yeah, the media hates RIM, thank god Facebook came along ..............."

I've made this point over and over and over and.........
How can you "Hate" a Company? Is it the product, the advertizing, the money, the management, the clerical staff, the line staff, the supply chain? Who? What?

I don't know how many people on this board own RIM stock, I own a paultry 100 shares. Yes, the price is down but, I bought it because I believe RIM makes exceptional products. I bought it knowing I probably wouldn't be able to sell at a profit for 1 or 2 years.

Oh yeah, do they hate the shareholders. The financial Media is the most uninformed I've ever seen. It's really scarey to have a 401K and realize that my retirement could be affected by a bunch of Screaming Meemies.

"Rim is stuck with $1 Billion worth of unsold Blackberrys and the inventory continues to stockpile" !
( data from Bloomberg) Rim really has a tough couple of quarters ahead of it until BB 10 arrives.

This is what I've been saying to RIM. Lower the price of the Bold 99xx to something like $199 or less and I'll get two. They are awesome devices.

" including opportunities to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives."

I hope this means licensing BB10 and BBM to other phone companies. Otherwise forget it!

Thorsten said BBM wouldn't be licensed. Not going to happen man, sorry to disappoint. OS licensing won't happen either.

Hate to say it but this appears to be the official beginning of the end for RIM. People can say what they will about this recent news but, based on my experience in mergers and acquisitions, this action usually 9 out of 10 times means sale. Sadly I think that the former Co-CEOs have run the business so far into the ground that it is simply a little too little too late to compete with the big boys. Wish it wasn't true but I cannot ignore the obvious.

It is likely over for RIM.

I would love to see Cascades on Samsung hardware. I've never been a physical keyboard user so an all touch Samsung BB10 would be pretty sweet. Great displays.

Why are they not trying to sell the BB10 phones in advance? Seems pretty easy. Im a builder and i try to sell my product before it's finished. I also show my apartments before the existing lease is up, preleasing. Maybe even promise to get me in a BB10 phone to me a few weeks early so i feel special.