Amid news of 200 layoffs and a 20 per cent stock plunge at Research In Motion Ltd., one Canadian analyst thinks that if industry buzz of a potential takeover for the Waterloo, Ont.-based BlackBerry maker were to come true, the outcome would be “horrible.”
The layoffs, which happened Monday after RIM announced the previous Friday it would make cuts to its 17,500 staff, is “overblown,” said Warren Shiau, director of research with Toronto-based Leger Market Research.
“On balance, RIM is hiring far more people than it’s laying off,” said Shiau. “What’s much more worrying is the fall in market capitalization.”
That drop in market value is concerning to Shiau, who thinks there may come a time when a company will decide RIM is actually worth pursuing. And, that company, he continued, would not have RIM’s long-term interests in mind. BLOG: RIM can blame its struggles on apps “They’ll only be interested in acquiring the user base and doing the minimum they need to maintain the customer base before migrating them in however many years,” said Shiau. “A RIM takeover can, in no way, be good for Canada.”
RIM reported lower revenue for the first quarter and, adding to that, has forecast second quarter results will be lower than expected. The reason, said RIM, is a delayed availability of handsets set to feature its newest operating system, BlackBerry 7. The new line of devices will become available second quarter of this year.
RIM’s tablet, the PlayBook, which went on sale earlier in 2011, was met with mixed criticism. Moreover, the 4G version of the tablet has been delayed to this fall, instead of the summer, when it was previously slated to be released.
Despite those setbacks, Shiau said RIM has a “fantastic brand equity” in the small-to-medium business and enterprise markets.
Unfortunately for RIM, which has dominated the corporate device space, it failed to take into account how important the consumer market would become, said Shiau. Nor, were they prepared for how quickly that would come about.
Michael Battista, research analyst with London, Ont.-based Info-Tech Research Group Inc., said RIM’s mistake was to not pay attention to the “personal-liable device trend,” which had implications for both the consumer and enterprise sides RIM’s business.
“Missing the BYOD (bring your own device) movement directly resulted in share losses for both markets because RIM never turned out a truly compelling and competitive offering that satisfied its customers,” said Battista.
In recent years, the smart phone market has produced other players, such as Apple and Google, who have grabbed a chunk of the mobile market.
Battista said while there is a niche audience for RIM’s devices in the corporate space, where “airtight security and control” is a requirement, it’s a space that is shrinking in size as consumer-centric mobile devices become increasingly suitable for the business arena.
“The slight edge they still have may be enough to sustain RIM for a while, but they’ll need to make some serious changes to compete in a world where consumer-focused mobile technology is becoming the same as business-focused mobile technology,” said Battista.
While RIM did ignore the consumer device market, Shiau said the developments that RIM has in the pipeline should be enough to rectify this—if it can afford the time, because, “the question is, what happens before the pipeline fully opens?
“They need to go on the offensive and make everyone from Wall Street to Main Street understand they’re going to come back in force,” said Shiau.
Battista said that while it would be “disappointing” if RIM were to be taken over by a non-Canadian company, the success that RIM has had in building a reputation of innovation for the Waterloo region would “open the door” for technology startups to get some attention.
Follow Kathleen Lau on Twitter: @KathleenLau