RIM shares fall as job cuts continue at BlackBerry maker

Michael Lewis Business Reporter

Investors and employees are bracing for more bad news when Research In Motion Ltd. provides a “business update” with its first quarter earnings report after the close of markets on June 28.
The company has already warned of an operating loss and said it will reduce staff to lower costs amid falling sales in North America and pricing pressure in international markets.
RIM on Wednesday confirmed that it is pursuing an unspecified number of job cuts from its global workforce of about 16,500, with Citigroup analyst Jim Suva calling the layoffs the “beginning of much more severity to come.”
A spokeswoman said more details may be provided when CEO Thorsten Heins holds a conference call with analysts to discuss results for RIM’s first quarter ended June 2.
The company could also offer a progress report on the work of J.P. Morgan Securities LLC and RBC Capital Markets, investment banks hired by RIM to evaluate options that include partnerships and licensing deals, along with a possible sale.
“Our target is to drive at least $1 billion in savings by the end of fiscal 2013 and headcount reductions are part of this initiative,” the Waterloo-based mobile device maker said in an email.
“RIM has reduced some positions as part of this program and may continue to do so as the company methodically works through a review of the business.”
In its most recent update in late May, Heins forecast the quarterly loss and said the company would no longer provide specific guidance.
Heins added RIM would face financial challenges for the next few quarters as it shifts to a new operating platform and launches a line of smartphone to replace its BB7 products. He said RIM would pursue significant reductions of staff in some areas, but would hire programmers, developers and other workers to support the rollout of its new BB10 phones and OS.
Online bloggers say RIM has been cutting staff in batches of about 10 over the past few weeks across most departments, including sales, manufacturing and administration, with more workers receiving their pink slips this week.
The company announced about 2,000 layoffs last July with many of the cuts focused on its operations in Waterloo. Since then, co-CEO Jim Balsillie has left the company, co-founder Mike Lazaridis has relinquished his co-CEO role, a number of managers have been replaced and RIM has named a new marketing chief and chief operating officer.
RIM is also restructuring its supply chain. On Monday it was announced its relationship with Celestica Inc., which makes the BlackBerry Curve and BlackBerry Bold phones at its plant in Mexico, would be wound down over the next few months. Lower cost suppliers such as Jabil Inc. and Flextronics Ltd. could benefit, though Jefferies’ analyst Peter Misek said RIM is slashing orders to parts suppliers by up to 20 per cent as shipments of BlackBerrys slide and the PlayBook tablet struggles to find footing.
Misek said the reduction in parts ordered would mainly impact production in the August quarter, adding expectations for a weak performance are already being priced into RIM stock. The shares declined by 41 cents to close in Toronto at $10.33 and are down more than 30 per cent this year as the company falls further behind Android phones and Apple Inc.
Raymond James analyst Steven Li is among analysts who have slashed earnings estimates for this fiscal year.
“Overall, we believe RIM’s May quarter was a challenging one on a number of fronts,” Li said in a note to investors.
“Our own channel checks placed to U.S. retail locations have indicated low consumer interest with RIM’s BlackBerry 7 portfolio rapidly aging and most sales being replacements.”
Along with its Waterloo headquarters RIM has a customer service centre in Halifax, offices in Mississauga and Ottawa and global operations in a number of countries including the U.S. and the U.K. http://www.thestar.com/business/sciencetech/article/1214126--rim-job-cuts-under-way-as-company-aims-to-save-1-billion-a-year?bn=1