RIM's Q1 much worse than expected: BlackBerry 10 delayed

RIM's Q1 much worse than expected: BlackBerry 10 delayed

Summary: The delay of BlackBerry 10 devices, which were supposed to come in the second half of 2012, sets up a cash flow concern going forward.


Research in Motion said its first quarter would be bad. It turned out to be worse. And RIM will struggle more because the company said its BlackBerry 10 platform will slip into the first quarter of 2013.

The BlackBerry maker reported a first quarter loss of $518 million, or 99 cents a share, on revenue of $2.8 billion, down 33 percent from $4.2 billion in the same quarter a year ago. Adjusted loss, which excludes goodwill charges, was $192 million, or 37 cents a share. Wall Street was expecting a loss of 4 cents a share on revenue of $3.07 billion.

RIM had already issued a profit warning for the first quarter and analysts were expecting the worst.

The delay of BlackBerry 10 devices, which were supposed to come in the second half of 2012, sets up a cash flow concern going forward.

Meanwhile, RIM is cutting 5,000 workers and speeding up its cost cutting programs. However, the BlackBerry 10 delay may set in motion a worst case scenario. RIM's services business is profitable, but those profits could be gobbled up by a hardware money pit.

Morgan Stanley analyst Ehud Gelblum earlier this week laid out a scenario where RIM would have to shrink dramatically to survive.

Today, RIM has $2.2 billion in cash and equivalents, but that war chest could evaporate quickly the longer the company takes to deliver new products. RIM shares fell more than 18 percent in afterhours trading.

The company maintained that the BlackBerry 10 platform is its "number one priority."

Specifically, RIM CEO Thorsten Heins said:

RIM's development teams are relentlessly focused on ensuring the quality and reliability of the platform and I will not compromise the product by delivering it before it is ready. I am confident that the first BlackBerry 10 smartphones will provide a ground-breaking next generation smartphone user experience.

On a conference call with analysts, Heins said:

  • "I want to assure you we are not standing still."
  • RIM's new Curve devices are being rolled out internationally.
  • RIM did grow its subscriber base.
  • New PlayBooks are in the final stage of testing and will launch "in the near future."
  • The company's developers have been overwhelmed by an immense amount of code that needs to be commercial grade.
  • Customers prefer a first quarter launch for BlackBerry 10 devices.
  • BlackBerry 10 will focus on the low-end of the market too and have QWERTY handsets.
  • RIM will also explore licensing BlackBerry 10.

RIM's challenge is that there will be new phones from Apple, Samsung, Nokia and a bevy of others to worry about by time BlackBerry 10 devices hit the market.

As for the outlook, RIM said it "expects the next several quarters to continue to be very challenging for its business based on the increasing competitive environment, lower handset volumes, potential financial and other impacts from the delay of BlackBerry 10, pressure to reduce RIM's monthly infrastructure access fees, and the company's plans to continue to aggressively drive sales of BlackBerry 7 handheld devices."

In other words, RIM will see an operating loss in the second quarter.

Wall Street is currently expecting RIM to report a loss of 6 cents a share on revenue of $2.84 billion and then turning a profit in the third and fourth fiscal quarters. Those estimates are likely to be cut dramatically.

RIM added that it is rolling out its cost savings plan, which includes outsourcing as well as layoffs. Given the BlackBerry 10 delay, RIM said it may "increase the scope and magnitude of these programs."

Specifically, RIM plans to outsource its repair operations, cut management, streamline its supply chain and cut 5,000 workers by the end of the fiscal year. Those moves are considered to be minimum requirements.

By the numbers:

  • RIM shipped 7.8 million BlackBerry smartphones.
  • It shipped 260,000 PlayBook tablets.
  • RIM's App World store has more than 89,000 applications.
  • Subscribers at the end of the quarter checked in at 78 million.

Topics: Mobility, Hardware, Mobile OS, BlackBerry, Security

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  • somebody needs to slap Thorsten and wake him up... you guys are dead!

    you aren't going to make it to the finish line... dead company walking. Find a buyer now!

    Your new snazzy phone and OS... with no apps to run on it and ecosystem behind it is going to fall flat on its face.. it's not going to matter one lick how fast, slick or stable it is.. there is nothing behind it, backing it up.. phones are just a vehicle to the ecosystem.. that's what people are buying with phones these days.. these guy are still out of it thinking a great OS and hardware it going to do anything for them... did you they see what the iOS and Android presentations.. even the Windows Phone 8 preview... these guys have absolutely nothing to compete with... RIM is bringing hash language to a gun fight... you're screwed.. find a buyer, if you can and quickly...
    • or

      they should defect the BB completely and go like Nokia did with a different platform altogether or think like Samsung and bring on multitude of devices with variety of platforms.
      Ram U
      • What do you think Blackberry 10 is?

        What do you think Blackberry 10 is if not the 'different platform' you request? They are calling it 'Blackberry 10' because they were sued when they announced they were going to call it 'BBX'.....but Blackberry 10 is not a mere 'upgrade' of the current OS, it is in fact a brand new platform, which is based on the QNX platform they purchased....they are in fact doing what you suggest, throwing out the current platform and replacing with a new one.

        RIM has to maintain a distinctive presence and identity or else they are doomed...and they certainly should not switch to Android....absolutely no one, not even the most devoted Blackberry users, would buy an Android based Blackberry...
        Doctor Demento
      • @Doctor Demento

        Well, I know BB10 is based on QNX, but in the current world of Smartphone would it make any sense to go with QNX? Where is the ecosystem? Switching to newer platform comes with real responsibility and commitment. Look at Microsoft, they were zeroed when they switched from Windows Mobile to Windows Phone. But at least Microsoft is committed and quickly was able to rebuild a better ecosystem. Even with that much of committment, they are still struggling to get into double digits. Now take RIM, how much of committment and enthusiasm they should build in order to bring forth a better ecosystem with completely newer platform. All of their old ecosystem is totally toasted with single shot.

        Look at Nokia, they got burnt out with their own platforms, Plam later HP with WebOS gone. Even Microsoft lost touch with Windows Mobile. All this because of not able to understand the ecosystem, and the committment the users look forward to.

        RIM should have realized this in 2008 itself when iOS was still in its infancy and Android was just born. They didn't and thats why they are the last ones to realize that they are not the same ones that were once leaders in the corporate world. They had opportunities all along at least until 2010. After that, nothing, total vaccum.

        I know there are some hard-core BlackBerry fans, but it is reality. RIM still has opportunity to come back, but they have to take bold steps. Instead of focusing on QNX or their own platform, they should adopt to an external platform and that relieves them from the burden of spending money on platform, instead they could spend resources on innovating the hardware side of the world, like Nokia is doing or adopt and diversify themselves to more platforms like Samsung is doing
        Ram U
  • Yeah Well

    When RIM had a chance to really control the smartphone market, they thumbed their noses and had prices too high for most to try their technology... Then they decided they needed consumers and released a few low end phones plagued with flaws... The Battery Pull was an everyday event.

    Of course the iPhone wasn't yet a major player on all networks and yet Blackberry decided to get creative and release a phone that you had to push the screen down to actually make it register a key or button press! Needless to say, this was a bone headed a move as anyone could have made!!!

    Anyway, I am not surprised that RIM is in this spot given that they do not have a good grasp on what their customers want!
  • "Customers prefer a first quarter launch for BlackBerry 10 devices."

    Wait, so customers would prefer a later launch that comes AFTER the holiday season? I guess Apple was clueless when they released the 4S in time for the holiday season? I guess Microsoft is completely out of their mind for targeting their Windows RT tablets to be released in time for the holidays?

    That, right there, is a microcasm of why RIM is in the mess they're in. RIM is obviously clueless as to what customers want, as evidenced by the whiplash they're still suffering from as they watched Apple and Android blow by by them on their way to the top.
    • RIM's customers are businesses

      Many businesses have their technology budgets reset in the first quarter of every year. So companies might prefer as Q1 launch over a Q4 launch.
      • As someone who oversees a technology budget...

        I can say that 3 months really doesn't matter from a budget standpoint. Enterprise customers can't just refresh their devices whenever they feel like it, they have to wait for eligibility just like consumers.

        And even if it did matter, I'd prefer devices be on the market for awhile, especially with such a monumental OS change, before my users start getting them in mass.

        And the "RIM's customers are businesses" is part of the problem anyway. For them to recover, they have to make devices and software that PEOPLE want to use because of features and functionality, not devices that company's want their employees to use because they're more secure and offer better management capabilities. I'm not saying security and MDM should be ignored, but the days of carrying two devices, one for personal use and one for work are fading for all but the most security minded companies or privacy minded individuals, and RIM needs to realize that. This is why Apple in particular has had so much success in the corporate market, even without trying.
  • Coming out after WP8 is going to really hurt. WP8 added all the security

    that enterprise has been waiting for. Bye bye RIM, hello WP8.
    Johnny Vegas

    They just keep getting "re-annimated", like the villian in a low-budget horror flick.

    RIM will not be alone on technology's Boothill.

    Microsoft, Intel, HP and many others have reserved their plots, the result of death by failing to INNOVATE.
  • Symbian

    Some said that Nokia had to stay with symbian, go with meego or some other stuff. Look where RIM is. Nokia could have been in the same place. Now there is some hope that Nokia may recover. I do not see anything yet for RIM.
  • always screwed. better late then never

    Its better to come out witha product that works then do a rush job.

    Think of this, if they rush their products to get it out asap, the the media will ben bitching about every flaw. The media is always anti RIM, and that causes them to loose buisness.

    No matter what rim does, they are screwed as the media is against them 100%.
  • blackberry sucks

    Their phones have always sucked. It was just a bunch of corporate clowns that used them.
  • Erm...

    I wonder how many of you guys have actually used QNX. You won't know what it is unless you own a Playbook. You won't know how the eco-system is like unless you've actually used a Playbook isn't it? Otherwise, all your comments are very much based on hearsay, and even more hearsay from writers who don't themselves experience the platform much either, and they've been caught with their pants down many times on their facts.

    RIM is indeed in a very jittery position. But if you compare Nokia with RIM and suggest that they do like Nokia, excuse me? Do you know the difference between subscribers and phone buyers?

    Thorstein's refusal to compromise will pay dividends. But its just frustrating for many people who are waiting for BB10 to come along. Why? I've never experienced a more fluid device than the QNX on Playbook. The updates are seamless. And that's a year ago and still beats the crap out of Quad core Android devices today. btw, I'm using Nexus and a slew of Android devices as well as iOS. Multi-tasking is important. QNX beats every other OS hands down on this alone.

    So guys, its unfortunate few people have laid their hands on a Playbook to understand better what BB10 is going to be like. But if you really want a more objective view about things than reading skewed reports about RIM in these tech blogs, go borrow and lay your hands on one of these Playbooks. BB7 is light years behind. And you'll appreciate what RIM is currently doing.

    I do hope they pull through. But I'm angry its going into Q1 2013!!! #@%!!&##
    Samuel Koh
  • Balckberry

    Blackberry should have focused more on services than devices. The market was crying out for good mobile device management software. BES could have been that if only they widened out to include iOS and Android, but its too late now.

    Also instead of focusing on a brand new OS, RIM should have adopted Android and perhaps customised it like what Amazon did with the Kindle Fire. I'm afraid there is only one eventulity for RIM - get out of hardware now or sink. Focus on your services.
  • Bad news

    More bad news for Blackberry. It is disappointing that Blackberry 10 is delayed. This launch was crucial for them to sustain in the current smartphone war.

    - Sara
  • RIM’s bad days are not going to be ended.

    The condition of Nokia and RIM is almost same, both are preparing to fight their last battle. if Nokia fails to entice users through its Windows 8 based 10-inch Tablet, then, the company will have to seek for potential mergers. The situation is almost same for RIM, the company has stacked its all on forthcoming BlackBerry 10 phone.
    A few days back, RIM announced to split its hardware and networking divisions apart. There’s also a probability that it could sell its hardware business to other potential player like Amazon and Facebook. But, for the survival of the company, it needs to have hardware division. By the way, without hardware, envisaging to launch BlackBerry 10 OS is infatuation. However, the company hired a financial firm (J.P. Morgan) to identify flaws, but, the effort seems fruitless this time.

    Read more: http://www.dazeinfo.com/2012/06/29/after-nokia-blackberry-also-decides-to-lay-off-5000-employees-will-job-cut-plan-work-like-ointment/#ixzz1zuPS5ndH