Dim Outlook for RIMM
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Research In Motion (NASDAQ: BBRY) recently announced that the latest quarter, the results of which will come to light on June 28 when the company announces earnings, is likely to take a hit because of the gloomy market situation. After a poor fiscal 2012 fourth quarter, the company again expects to run into losses in the first quarter of 2013. Want to know more about RIM’s struggle? Read on.
The action and the Reaction
The company behind BlackBerry announced that it wants to test the feasibility of its various financial strategies and has appointed J.P. Morgan Securities LLC and RBC Capital Markets for this purpose. Owing to the highly competitive market environment, the current quarter is suffering a lot with lower sales volume, and management expects to report an operating loss. This actually came as a shock as the analysts were expecting the company to deliver a profit of $0.42, excluding some items. As a reaction to this news, the shares of the company halted from trading for about 20 minutes and when it again started trading, the prices plunged as much as 15%, taking the figure below $10 for the first time since 2003.
BlackBerry Falling from Grace
The troubled smartphone manufacturer, who had pioneered the instant e-mail services when it first introduced the BlackBerry and took the world by storm, is now struggling to stand straight. With intense competition coming from Apple (NASDAQ: AAPL) and other major players such as Samsung Electronics, HTC and Sony running Google’s (NASDAQ: GOOG) Android OS, the company is losing out on its market share.
BlackBerry’s hand-held devices, be it mobile phones or tablets, are taking a huge beating from Apple’s iPhone and iPad, and Samsung’s Galaxy S2, Galaxy Note and Galaxy Tab -- at present, Samsung is the leader with a 29% market share worldwide, closely followed by Apple with a 24% market share. RIM is far away from both with a share of 7% only, just above HTC’s 5% and below Nokia’s 8%. But, this is not the rock bottom for RIM. Its situation might weaken further as Nokia’s Windows Phone OS powered handsets gain more and more customer acceptance.
The company is also facing difficulties in retaining its top talent pool. Patrick Spence, RIM's global sales chief, joins a long list of top officials who have ended their association with the company since January.
RIM is in a desperate attempt to regain its lost position and improve its situation against the rivals. The company is looking at a major restructuring, which shall involve reduction in spending and job cuts for about 2,000 of its employees, if not more, throughout the year. There are chances that the company might face acquisition attempts. Last year, the company was already in talks with Amazon and Microsoft (NASDAQ: MSFT) for a potential takeover
The Foolish Bottom Line
The chances of revival from the poor first quarter is low as management expects the performance to suffer in the coming few quarters also. However, there are points that still provide a dim ray of hope for this smartphone manufacturer. Firstly, the security features available on BlackBerry are unmatched and no other smartphone maker can compete with that. Secondly, the company is working on its new OS – BlackBerry 10. With a whole new experience of a new OS, RIM might just be able to grab user attention and get a boost. However, before this can happen, RIM needs to make sure it can fund its operations well. Only time will say if this leader turned follower can again become a leader.
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