Research In Motion’s fortunes have been the subject of many an article as of late, with the company’s slide into the abyss seemingly set in stone.
Now, shares in RIM fell eight percent in after hours trading Tuesday after the company announced it would be operating at a loss with its next earnings report. That report is due at the end of June and is expected to further outline the dismal picture for the Waterloo tech giant.
The company also confirmed plans to slash and burn thousands of jobs. RIM said that it would cut positions as part of a massive global restructuring scheme. The corporation currently has a workforce at around 16,500 and some reports have tagged RIM as cutting more than 2,000 of those jobs.
“Our financial performance will continue to be challenging for the next few quarters,” CEO Thorsten Heins said. ”The ongoing competitive environment is impacting our business in the form of lower volumes and highly competitive pricing dynamics in the marketplace, and we expect our [first quarter] results to reflect this, and likely result in an operating loss for the quarter.”
Expectations in terms of subscribers sat in the neighbourhood of 1.5 million, but RIM says it only added half a million in the quarter.
While RIM’s suggestion that it would be operating at a loss surprises few, the big news is just how mammoth the loss figures are and how tough it will be for the company to climb out of such a gargantuan hole.
“The big surprise is the magnitude of the loss,” Troy Crandall, an analyst with MacDougall, MacDougall & MacTier, said. “What they are saying here is that things are way worse than anyone had anticipated.”
As if the fire needed more fuel, Bloomberg reported Tuesday that the company’s internal inventory has grown by 18 percent in the last quarter. That means that RIM now has over $1 billion worth of its own devices taking up warehouse space, up from $618 million at the same time last year. And those numbers don’t count how many RIM devices, like PlayBooks and BlackBerry devices, are sitting in retail stock. Worldwide shipments of RIM products were down 29.7 percent last year, which accounts for the rise in inventory.
With products sitting in storage and expectations dwindling, it’s hard to imagine the company pulling out of this one. BlackBerry 10 will need to be a roaring success for anything to happen on the positive front, but it’s going up against Windows and Apple’s iPhone 5.
If RIM’s fortunes shift with BB10 – and that’s about the biggest “if” money can buy – things may get better for a while. If they don’t, Heins may be overseeing another Canadian sell-off as RIM joins Nortel on the list of companies put out to pasture in the Great White North.