* RIM to cut 11 pct of workers, more than expected
* COO Morrison to retire, management reshuffled
* Shares drop 4 percent
(Adds details, updates share price)
By Alastair Sharp
TORONTO, July 25 BlackBerry maker Research In
Motion RIM.TORIMM.O plans to cut about 11 percent of its
workforce as it struggles to keep pace with Apple (AAPL.O) and
Google (GOOG.O) in the mobile market it once dominated.
The Canadian company's shares sank 4 percent following the
Monday announcement of 2,000 job cuts, a month after RIM said
it would reduce headcount for the first time in almost a
decade, to around 17,000.
RIM, which described the cost reduction as "a prudent and
necessary step" for its long-term success, said it would start
informing those employees who will lose their jobs this week.
The job cuts, which were slightly deeper than some had
expected, raised questions about whether lower costs alone
would go very far in addressing RIM's lackluster financial
performance or the steady erosion of its market share.
"The problem is you can't cut your way into growth or
market leadership, and while I'm sure there was fat at RIM, the
core problem sits squarely with management," said Ed Snyder
from Charter Equity Research.
Shareholders have attacked RIM's structure, in which
co-founder Mike Lazaridis shares the chief executive and
chairman roles with Jim Balsillie, saying it gives the pair too
much power. At its annual meeting last month, RIM narrowly
avoided a vote on splitting up the top roles. [ID:nN1E75T24F]
On Monday RIM confined itself to some modest shuffling of
executive roles following the retirement of Don Morrison, one
of its three chief operating officers. The other two, Thorsten
Heins and Jim Rowan, will take on additional responsibilities.
"Cost-cutting is unlikely to change the competitive
position for the company" or accelerate RIM's revenue growth,
BGC Partners analyst Colin Gillis said.
That said, analysts also saw lower costs as a necessary
adjustment to a new reality facing RIM, which was once the
leading force in the multibillion-dollar smartphone market.
Apple's iPhone and devices powered by Google's Android
software have steadily eroded BlackBerry's market share,
especially in the United States, while RIM's PlayBook,
introduced in April, was a late entry to a tablet computer
market that Apple's iPad virtually invented.
RIM's shares -- halved so far this year -- have been
weighed down by earnings that missed the company's own limp
forecasts and a dire warning that sales will slip further
because of delays in getting new smartphones to market.
"I think this is obviously realigning the cost structure to
a new growth, or sales, reality," said Peter Misek, an analyst
at Jefferies & Co.
FINANCIAL IMPACT UNEXPLAINED
RIM said it would explain the financial impact of the cuts
when it reports second-quarter results on Sept. 15. RIM said
the second-quarter and full-year outlooks it had already issued
did not reflect the impact of the cuts.
The cuts were "more significant than previously suggested,"
said RBC Capital Markets analyst Mike Abramsky, who estimated
the pretax charge at between $200 million and $250 million.
Monday's announcement was the first time RIM quantified its
job cut plans, which it revealed last month.
RIM last cut jobs in 2002, when it slashed 10 percent of
its staff following a dip in revenue and spiraling costs as it
started selling its early BlackBerry phones via carriers.
The departure of Chief Operating Officer Don Morrison was
expected. Currently on temporary medical leave, the executive
will retire after more than 10 years at the company.
RIM said Thorsten Heins, a former chief technology officer
at Siemens (SIEGn.DE) who joined RIM in 2007, will now oversee
both hardware and software product engineering, and Jim Rowan
will take charge of operations.
Analysts said the tighter integration between the hardware
and software teams represented by Heins' increased role should
help RIM get new products out quicker.
RIM promoted Patrick Spence, who has impressed analysts and
investors as managing director for the Europe, Middle East and
Africa region, to head of global sales and marketing.
Chief Technology Officer David Yach will focus on RIM's
software platform and application ecosystem as RIM juggles
upgrades to its aging BlackBerry operating system and an
eventual transition to QNX, which powers the PlayBook tablet.
His responsibility for the enterprise business has been
shifted to Chief Information Officer Robin Bienfait.
The changes follow a stream of RIM employees who have
defected lately, including two who left for rival Samsung
Electronics (005930.KS) in a month. [ID:nN1E76J100]
Misek, who has an "underperform" rating on RIM's stock,
said the job cuts were less important to RIM's outlook than a
successful launch of devices due within months and its eventual
transition to the QNX operating system on its smartphones.
"I think the key here, more than ever, is when do their
products launch and what kind of reception will they have and
most importantly, when will QNX come in. We don't think those
answers are here yet," he said.
The layoffs are fewer in number but a larger portion of
RIM's workforce than the 7,000 layoffs announced in April by
Finland's Nokia NOK1V.HE, a second mobile communications
giant struggling to adapt to the ascendence of Apple and
RIM's Nasdaq-listed stock, already near multi-year lows,
was down 4 percent at $26.80 by early afternoon. The stock was
down 4.3 percent at C$25.34 on the Toronto Stock Exchange.
(Additional reporting by S. John Tilak and Euan Rocha in
Toronto, Aftab Ahmed in Bangalore; editing by Janet Guttsman
and Frank McGurty)