Happy 5th Birthday iPhone - Fire at RIM on the Wrong Day
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A Costly Delay
While Apple has never released a launch date of its latest phone, it did go on sale nearly five years ago on the 29th of June. On the very same day this year, Blackberry maker RIMM (NASDAQ: BBRY) unexpectedly announced its would be delaying previously announced Blackberry phones, with the Blackberry 10 now bumped up to Q1 2013.
The news seemed like the last thing the Blackberry maker investors wanted to hear. But competition has heated up recently, as Google (NASDAQ: GOOG), and Apple (NASDAQ: AAPL) phones began their ascent of the market five years ago. Along with the bad news, the company also announced a $518 million loss in the first quarter of 2012, having only sold 7.8 million phones, and 250 thousand tablets. The loss also led the way for a 5,000 employee cut with the goal of realizing $1 billion in cost savings.
I don’t think cutting the launch of the Blackberry 10 was a wise decision. For one, that would mean the phone would arrive after the new iPhone and Windows Phone 8 handsets, making it nearly impossible for consumers to trust the company going forward. Upon the bad news the company’s stock plummeted 14.5 percent in after-hours trading.
It was expected the company would take on larger financial losses than usual, but the delay of an important phone was unexpected. The company tampered expectations when it warned investors that earnings would be lower than anticipated. However, the company is currently not in any immediate financial danger and holds $2.2 billion in cash reserves.
Cut in Two?
<address>News circled before the announcements that the company is considering splitting in two. The Sunday Times, a London based newspaper, is reporting through anonymous sources that the company is considering selling off the hardware business, or licensing the operating system for Blackberry 10 to other providers. Alternatively, the report also suggests that the company could maintain itself and sell a portion to a larger competitor such as Microsoft (NASDAQ: MSFT).
Analysis – Missing the Deadline
Like Woody Allen once said ‘showing up is 80 percent of life,’ delaying the Blackberry 10 is a terrible decision. For one, the company will miss the holiday season which is often when mobile carriers receive their highest shipments and sales. To add to the grief, the company plans to cut 5,000 of its 16,500 workforce, that’s 30 percent of the entire workforce. The plan not only could further delay the launch of the new phone, but also discourage morale at an already struggling company.
Selling only 7.8 million phones is down nearly 41 percent from the previous quarter. With new phones now 12 months away and new technologies emerging, one has to wonder what the company is thinking. But let’s not forget things will change a lot in 12 months. Microsoft will launch Windows Phone 8, Apple will have a new iPhone with more Siri based features and turn based maps, and Samsung will be leading the way with new Android hardware; the mobile world will be a different place.
I had spoken about this previously, and Microsoft has a perfect vehicle to enter the mobile industry with the purchases of Skype, Yammer, and the integration they can have with Microsoft Office. This should be alarming news to the company that iconically received the cultural coin ‘crackberry,’ in the corporate world and in personal use.
Additionally, the bad news of a delay no longer hurts the hardware maker exclusively. The mobile universe now is very reliant on the development of applications for the phone ecosystem to survive. By delaying the launch of new hardware, what incentives are there to promote developer support for the new platform? Associated with lower developer support and a more competitive landscape are the looming price cuts the company may have to levy to keep customers loyal.
The company is an excellent collection of parts that can be sold and used at other companies, but using them as a whole is starting to look like a bad decision. RIM CEO Thorsten Heins said that the company is expecting the next several quarters to be “very challenging.”
muhammadbazil owns shares of Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
