RIM Shares Drop as Job Cuts Announced

by Jordan Richardson on June 17, 2011

Things keep going from bad to worse to even worse for Waterloo’s Research In Motion. The BlackBerry maker has been in a slump as of late, to put it mildly, and has struggled to stop the bleeding. Market share has been dropping like a stone and the company is now in full retreat mode.

Shares in RIM fell on Thursday after the corporation announced that it planned to cut jobs. Along with this, RIM revealed fiscal numbers that were below expectations. Profit outlook was slashed up as a result and many believe that the once dominant company is on its way down in flames in a royal hurry.

Revenues for the first fiscal quarter were $4.9 billion, representing a drop from the previous quarter. Profit, meanwhile, was down 10 percent from the same quarter a year earlier.

The sharp reduction in profit forecasts seems reasonable, of course, and it demonstrates that the company isn’t in denial, but it sent investors running for the hills. RIM cut expectations for full-year profit to between $5.25 and $6.00 a share, down from the $7.50 figure it had lined up just a couple of months ago. Revenue in the second fiscal quarter is expected to be about a billion below recent expectations.

After these dismal announcements, shares dropped nearly 14 percent in after-hours trading. Stock in the company has dropped by nearly 50 percent this year alone, which has set RIM back by about $15 billion in overall market value.

“Fiscal 2012 has gotten off to a challenging start. The slowdown we saw in the first quarter is continuing into Q2,” said co-CEO Jim Balsillie. “We’re currently approaching the tail end of a significant transition in our business, and quite frankly few companies would have been able to survive, but we have.”

The answer is what the answer always seems to be in these situations: cut, cut, cut. The company called it a “headcount reduction.”

“This realignment will be focused on taking out redundancies and a reallocation of resources to allow us to focus on the areas that offer the highest growth opportunities and align with RIM strategic objectives, such as accelerating new product introductions,” said a RIM release.

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Written by: Jordan Richardson. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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