The Canadian smartphone maker RIM, best known for its BlackBerryphones, has announced that it will cut 2,000 jobs, or 10% of its global workforce, as the company struggles to maintain profitability in the face of increasing competition from Apple's iPhone and smartphones using Google's Android operating system.
The company is also shaking up its second-level management, with the departure of its chief operating officer Don Morrison, who went on medical leave in June. His job will be split into two roles. RIM said that it will inform employees affected by the cuts this week.
Shares in the company, which is based in Waterloo, Ontario, fell by 41c, or 1.5%, in pre-market trading. They have fallen by 45% since the start of June 2010 as delays with new products and the disappointing launch of the PlayBook tablet, allied to falling selling prices, have pointed to concerns about its longer-term future. Analyst criticism has focused on the arrangement whereby Mike Lazaridis and Jim Balsillie share both the chief executive and chairman roles.
The company in June lowered its guidance for the quarter and full year below analysts' estimates, suggesting profits could be as much as 15% below expectations.
The shakeup is being seen as part of a rationalisation as RIM struggles to contain costs while competing with Apple's iPhone and smartphones using Google's Android mobile operating system. In the three months to May, the number of phones shipped – 13.2m – grew by just 18%, its smallest amount in more than four years, in a smartphone market that is forecast to grow by 50% this year. That means RIM is falling behind Apple, whose iPhone sales more than doubled to 20.3m in the three months to the end of June, and Android phones, which now command about 38% of the smartphone market. Its attempt to launch into the tablet market blazed by Apple's iPad have so far gone slowly, with 500,000 shipped by the end of May, compared with the 9.2m sold by Apple in the quarter ending in June.
The cuts at RIM follow its acquisition of software company QNX in April 2010, bringing 270 employees. QNX will provide the operating system that will power a new generation of RIM smartphones expected in 2012 – but RIM has already said that it will this year release seven new phones, based on an update to the BlackBerry operating system. One is expected to be a touch-only device like the iPhone or Android phones.
That will be a challenge for the company to maintain profitability as it straddles its enterprise and consumer customers, said Carolina Milanesi, smartphone analyst at the research company Gartner.
"The touch-only device will have to be a success for RIM, but they also need keyboard-based phones to appeal to teenagers," she said. "The other question is how they are going to position themselves with enterprises – which is where the money is."
While the broader smartphone market is split 70-30 in number in favour of consumers against enterprises, RIM's business is split roughly evenly. "Enterprise is where the money is," said Milanesi. "But if you bring out seven devices and they know that there's going to be a new QNX platform coming out next year, they will tend to hold off buying until they can see what there is."
On Monday morning the company insisted that a comScore survey which put its UK user base at the end of May 2011 at just 3.6m subscribers was incorrect, and that in fact it had 7m. However the comScore relates to consumers only, and does not survey enterprise customers.
The company is also shaking up its second-level management, with the departure of its chief operating officer Don Morrison, who went on medical leave in June. His job will be split into two roles. RIM said that it will inform employees affected by the cuts this week.
Shares in the company, which is based in Waterloo, Ontario, fell by 41c, or 1.5%, in pre-market trading. They have fallen by 45% since the start of June 2010 as delays with new products and the disappointing launch of the PlayBook tablet, allied to falling selling prices, have pointed to concerns about its longer-term future. Analyst criticism has focused on the arrangement whereby Mike Lazaridis and Jim Balsillie share both the chief executive and chairman roles.
The company in June lowered its guidance for the quarter and full year below analysts' estimates, suggesting profits could be as much as 15% below expectations.
The shakeup is being seen as part of a rationalisation as RIM struggles to contain costs while competing with Apple's iPhone and smartphones using Google's Android mobile operating system. In the three months to May, the number of phones shipped – 13.2m – grew by just 18%, its smallest amount in more than four years, in a smartphone market that is forecast to grow by 50% this year. That means RIM is falling behind Apple, whose iPhone sales more than doubled to 20.3m in the three months to the end of June, and Android phones, which now command about 38% of the smartphone market. Its attempt to launch into the tablet market blazed by Apple's iPad have so far gone slowly, with 500,000 shipped by the end of May, compared with the 9.2m sold by Apple in the quarter ending in June.
That will be a challenge for the company to maintain profitability as it straddles its enterprise and consumer customers, said Carolina Milanesi, smartphone analyst at the research company Gartner.
"The touch-only device will have to be a success for RIM, but they also need keyboard-based phones to appeal to teenagers," she said. "The other question is how they are going to position themselves with enterprises – which is where the money is."
While the broader smartphone market is split 70-30 in number in favour of consumers against enterprises, RIM's business is split roughly evenly. "Enterprise is where the money is," said Milanesi. "But if you bring out seven devices and they know that there's going to be a new QNX platform coming out next year, they will tend to hold off buying until they can see what there is."
On Monday morning the company insisted that a comScore survey which put its UK user base at the end of May 2011 at just 3.6m subscribers was incorrect, and that in fact it had 7m. However the comScore relates to consumers only, and does not survey enterprise customers.
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