Shares in Research in Motion were today temporarily frozen by its management. The BlackBerry maker resumed trading on the Nasdaq no more than fifteen minutes later.
Chief executive Thorsten Heins said that the company will likely suffer an operating loss for the fiscal first quarter that ends on Thursday. It is thought shares were suspended in a bid to protect the company's market cap, currently at $5.7bn at the time of writing and falling.
Had RIM delivered the news while the stock was still actively trading, the repercussions could have been unrecoverable. It is likely tomorrow when analysts have the time to fully examine the company's bottom line, we may see the stock further frozen or another significant drop in value.
RIM's profit warning for the first quarter confirmed what analysts have feared. The company is seeing sales plummet ahead of BlackBerry 10. The bigger question is whether RIM can hold out that long.
RIM is haemorrhaging employees just as much as it is losing cash and value. The company is running out of ideas and has placed all its eggs in one shaky looking basket.
Earlier this week, I said: "some have argued it’s too late, while others are simply glad the company is still in business." That point has come later than expected, but it was all but inevitable.
The company made almost no bones about the fact it has rested most of its future stake in its forthcoming platform and next-generation BlackBerry 10 smartphones. With an expected release date of October and a plummeting share price, the company may not even reach a point of recovery.
Lost in the bad news from RIM was that the company will have more than $2.1 billion in cash. RIM will continue to cut costs. However, the reality is that RIM is in full-blown lock-down at the moment.
The value of RIM shares have been down 80 percent over the past twelve months, and have slumped more than 10 percent in after hours trading, below the $11 per share mark at around 2 p.m. today.
RIM cannot keep doing 'nothing'. It has to do 'something'. All it has on the table is to get BlackBerry 10 out the door. It hasn't released a good set of phones in years, and despite it resting in third place behind Android and iPhone, barely holds onto the edge.
It needs to get BlackBerry 10 out now. It's all it has. It's the only thing it has left besides the scraps off the cutting room floor. Without a smartphone range, its data infrastructure is simply gathering dust. But BlackBerry 10 isn't ready and it's far from being ready. RIM has to pull something out to keep the market interested.
This is exactly what happened with Palm. Palm was in dire straits and it had next-generation handsets on tap ready to be released, but it was months from selling any product based on its upcoming technology. In the interim, HP bought them, and we all know how that ended up.
It's likely history will repeat itself, and result in a very similar scenario to the Palm--HP sale.
Beyond all else, RIM doesn't have any options left.
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- Yahoo lays off 2,000: Promises ’smaller, nimbler’ company
- CNET: HP plans to cut 27,000 jobs, plow savings into R&D
- ZDNet Great Debate: RIM or Nokia: Which has the better turnaround prospects?