Canadian-based smartphone maker Research in Motion Ltd. (NASDAQ: RIMM) is expected to fire about 2,000 employees as soon as the end of this week as the struggling company tries to save itself by cutting $1 billion in costs by the end of 2013. Last week the company’s global sales head resigned, just one of several executives to leave since the beginning of the year.
RIM’s problems started with the introduction of the iPhone from Apple Inc. (NASDAQ: AAPL) and got worse when Google Inc. (NASDAQ: GOOG) offered its Android smartphone operating system to handset makers for free. Samsung Electronics (OTC: SSNLF), HTC Corp., and others adopted Android, which has become the dominant software platform for smartphones. RIM’s situation could get even worse with the expected fall entry of a new smartphone from Nokia Corp. (NYSE: NOK) and Microsoft Corp. (NASDAQ: MSFT).
The Canadian company employs about 16,500 workers world wide, and this week’s anticipated cuts will lower the total workforce by 12%. Some observers expect even deeper cuts from the company which now ships only about 7% of the smartphones sold globally. The company fired 2,000 workers last summer.
The company’s inventory grew by 18% in the past quarter, not counting the phones it has already shipped to carriers and retailers. With the expected introduction of new phones later this year with the company’s BlackBerry 10 operating system, those phones won’t be going anywhere and RIM will undoubtedly be forced to write down even more inventory. RIM wrote down $485 million on its PlayBook tablet in December 2011 and $267 million on Blackberry inventory in March.
Even after this week’s expected layoffs RIM’s problems won’t be over. The BlackBerry 10 phones are late, no one is buying the available models, and company’s market share is sinking, and a new competitor from Nokia-Microsoft is set to hit the market. It’s no wonder the share price has sunk -75% in the past 12 months.
RIM stock closed at $11/share last Friday in a 52-week range of $10.57-$43.91. At their highest, RIM’s shares sold for around $145/share.
Paul Ausick
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