RIMageddon: Heins follows turnaround playbook, doubles down on enterprise

Summary:RIM struggles to hold its subscriber base as it refocuses on enterprise services and pulls back on me-too consumer efforts.

Research in Motion's fourth quarter was the trainwreck that was expected, but new CEO Thorsten Heins cleared the executive suite and lowered the expectations for the future. In other words, Heins is following the playbook of many new CEOs and focusing on the company's strengths.

The moves from the new CEO playbook (not to be confused with RIM's tablet): Reset expectations, shake things up a bit and hunker down for what's going to be a bumpy ride for the quarters ahead. When Dell started its turnaround it also stopped providing an outlook.

How bumpy? RIM's business doesn't look good. The company reported a fourth quarter net loss of $125 million, or 24 cents a share, including goodwill and inventory writedowns. Revenue for the fourth quarter was $4.2 billion, down 25 percent from a year ago. Excluding charges, RIM's fourth quarter earnings were 80 cents a share. Wall Street was looking for fourth quarter earnings of 81 cents a share on revenue of $4.53 billion.

CNET: RIM results look bleak on fourth-quarter loss

On a conference call, Heins said that RIM needs an aggressive shakeup and left the door open to multiple possibilities. "We are undertaking a comprehensive review of strategic opportunities including partnerships and joint ventures, licensing, and other ways to leverage RIM's assets and maximize value for our stakeholders," said Heins.

Heins added that RIM will focus on managing multiple devices as well as doubling down on its enterprise strengths. "We can't succeed being all things to all people," said Heins. RIM will also look to exit media delivery and consumer focused efforts. Heins added that the company has been whacked because it lacked 4G support.

RIM's quarter could have been worse, but the company stopped providing an outlook. That move by Heins makes sense. His predecessors missed earnings projections by a country mile after coming out with overly optimistic projections. RIM's new policy is to refrain from providing an outlook. RIM did say that "company expects continued pressure on revenue and earnings throughout fiscal 2013."

Even though Heins said that RIM wasn't a turnaround story when he took over all signs point to the company being a reclamation project. To wit:

  • The company shipped 11.1 million BlackBerry smartphones, which was light.
  • RIM wrote down BlackBerry 7 inventory.
  • 500,000 BlackBerry PlayBooks were shipped.
  • Heins said that RIM has a strong subscriber base of 77 million.
  • BlackBerry 10 phones are on track for the latter part of 2012.
  • But Heins said: "the business challenges we face over the next several quarters are significant."

Clearing the exec suite

RIM's fourth quarter results also came with a bit of house cleaning. Jim Balsillie, former co-CEO, has resigned from RIM's board. CTO David Yach will retire. Jim Rowan, chief operating officer of global operations, has resigned to pursue other interests.

RIM said that it will look for one operating chief across the company.

These moves---especially Balsillie's resignation---put a definitive end to RIM's previous regime.

However, Heins will need a seasoned turnaround team to compete. RIM's market share is eroding rapidly, according to Nielsen. Meanwhile, analysts note that RIM's BlackBerry 7 devices are aging rapidly.

Heins added that RIM is on track to hiring a chief marketing officer. He will also outline his new team going forward.

Another home run needed

RIM's fortunes largely hinge on new BlackBerry devices on deck later in 2012. In the meantime, Heins said RIM will focus on pushing new BlackBerry 7 devices and catch new smartphone users. Heins said the company must keep its subscriber base in tact so it can develop new services for the enterprise. Heins was even forced to acknowledge that security and push email support---RIM's historical mainstays---aren't valued as highly anymore.

Heins noted that BlackBerry 10 devices will be on time, but analysts said that RIM needs a better ecosystem to compete. Developer devices will be delivered in May with shipments of BlackBerry 10 devices later this year.

The biggest worry for RIM going forward is competition. Wedbush analyst Scott Sutherland said in a research note:

With the continued momentum and global expansion of iPhones and Android-based phones, our checks with industry contacts and carriers indicate interest is minimal for BlackBerry phones outside of certain emerging markets. Furthermore, with Window 8 devices coming to the market with Nokia and others, we see increased competition.

Sutherland argued that RIM lacks the content, ecosystem and devices to compete.

Related: RIM's Q1 outlook expected to be weak as BlackBerry 7 devices age rapidly

Topics: Security, BlackBerry, Mobility

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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