After dismal earnings report, RIM shares slammed

BlackBerry 10 delay, layoffs and stock decline put future of company in serious doubt

Blackberry creator Research in Motion (RIM) saw its stock slammed Friday, following a dismal quarterly earnings report.

The first quarter of fiscal 2013 saw revenue sink 33% to $2.8 billion from $4.2 billion in the prior quarter, RIM announced Friday.

How bad are things getting at RIM? The $4.2 billion in sales from the previous quarter was down 25% from the quarter before that.

On the news, shareholders dumped their holdings, causing shares to fall over 19% on Friday, ending at $7.39.

And there is even more devastating news for the company: the earnings report also included an announcement of a delay of the Blackberry 10, which was seen by many as RIM’s last, best chance at survival.

“Over the past several weeks, RIM’s software development teams have made major progress in the development of key features for the BlackBerry 10 platform;  however, the integration of these features and the associated large volume of code into the platform has proven to be more time consuming than anticipated. As a result, the Company now expects to launch the first BlackBerry 10 smartphones in market in Q1 of calendar 2013.”

In March, after posting lower-than-excepted numbers for its quarter, RIM announced the resignation of numerous executives, including former CEO Jim Balsillie as Director of the Company’s Board. CTO David Yach and COO Jim Rowan. The company also said it would be backing off consumer efforts, offering lower tier pricing plans and focusing on foreign markets, where the BlackBerry is still competitive.

The launch of the BlackBerry 10 was the company’s best shot to hold onto its foreign market numbers, including in the UK, where the BlackBerry still accounts for over a quarter of phone sales. 

Now, with the phone being delayed until 2013, coupled with the announcement of the loss of 5,000 jobs by the end of the year and the revenue loss the company is experiencing, investors do not seem to have much confidence that the company can survive.

Multiple brokerage firms have cut their price targets on RIM stock, and some have sent notes to clients about the company, forecasting its demise, Reuters reported on Friday. 

"We do not expect RIM to successfully drive a turnaround of its financials, even with the launch of BB10 next year," Nomura Equity Research, wrote in a note to its clients. By their estimates, RIM will be gone by 2020.

How far RIM has fallen

The BlackBerry was once one of the hottest phones in America.

RIM had 43% of the market share in January 2010, and its stock was hovering the $65 range. By January 2011, though, shares were down to 30.4%, and by April 2011, RIM had a U.S. mobile share of 25.7%, and stock had slipped a bit to the around $55. Smartphones run by Apple and Android began to run third-party apps, something the Blackberry does not do, and were taking an increasingly large part of the market away.

By June 2011, market share was 23.4%, and RIM stock was already down to around $35 a share, a far cry from its peak of $143.89 in June 2008. The stock would go below $30 by the end of the month and it has steadily fallen since then.

By November 2011, RIM had only 6.5% of the market, with stock lower than $20 a share. As of the latest study, RIM no longer even makes the top 5.

In research done last year, when potential smartphone were asked which brand they were planning to buy, only 11% said Blackberry, compared to 31% for Android and 30% for Apple. In March 2011, Blackberry accounted for only 22% of the smartphone market share. Android and Apple together accounted for 64%. 

RIM attempted to enter the tablet market in April 2011 with the PlayBook. The device came without e-mail, contacts or the Blackberry messenger, and prices were quickly slashed. It seems like no matter what it tried to do, RIM could never beat Apple at its own game. 

(Image source: blogs.forrester.com)