Is RIM, a Canadian national icon, at its breaking point?

The Globe and Mail

Thursday RIM managed to shock Bay Street analysts with its dismal performance. (Matthew Sherwood for The Globe and Mail)

Research In Motion is slashing its global work force by 5,000, nearly a third of its employees, as the one-time icon of Canadian innovation suffers through the darkest days of an already dramatic decline.

RIM, a rare beacon of high technology in a country more famous for natural resources and banks, essentially invented the smartphone with the BlackBerry and enjoyed years of roaring success.

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But now RIM is struggling for survival, battered by the fast-moving mobile technology market and wildly popular devices from Apple and other competitors. Profits have turned to huge losses as RIM has failed to release a smartphone that can stand up to the iPhone or any of the sleek gadgets running Google’s Android software.

RIM’s rapidly fizzling fortunes are a blow to the Canadian technology sector, its hometown of Waterloo, Ont., and Canada’s ambition to produce globally competitive innovators.

“RIM has made an incredible contribution to the information and communication technology industry in Canada,” Gary Goodyear, MP for Cambridge, Ont., and Minister of State for Science and Technology, said in a statement. “This is a business decision and my thoughts are with the affected workers and their families.”

Leaders are clinging to hope in Waterloo, where RIM employs about 9,000 people and where RIM’s former co-CEOs Mike Lazaridis and Jim Balsillie have spent millions on scientific and academic institutions. “I think every single Canadian should be buying Canadian technology,” said Waterloo mayor Brenda Halloran. “We need to remember they need our support and rally around them and continue to use their products.”

But on Thursday, amid the lowest expectations anyone has ever had of the company, RIM still managed to shock Bay Street analysts with its dismal performance. For the first time in eight years, RIM lost money – posting a net loss of $518-million (U.S.). Revenue collapsed by 33 per cent to $2.8-billion from the previous quarter.

“This is nothing short of a complete disaster,” said Kris Thompson, a technology analyst with National Bank Financial.

Perhaps most damaging to the company, however, is that RIM said it would again delay the launch of its crucial BlackBerry 10 smartphones, which were due out in the fall and have new software meant to re-energize consumer and corporate interest in the BlackBerry platform. Now RIM said those devices won’t hit the market until early in 2013, which means the company will miss the important back-to-school and holiday shopping seasons, when most sales are made, and have to battle for space on store shelves against the newest iteration of the Apple iPhone. As RIM continues to grapple with the conundrum of maintaining sales of current BlackBerrys while building anticipation for future products it hopes will save the company, employees in Waterloo and around the world are facing deep cuts. “I understand this is an incredibly difficult message to deliver but it is necessary,” RIM president and CEO Thorsten Heins said on a conference call with financial analysts.

RIM is said to be planning a global town hall for Friday morning, although Mr. Heins could not offer much detail on the job cuts. “No one is surprised,” a RIM employee said of the company’s worsening financial shape and the job losses. “My team did have a moment of silence for the 5,000 cuts, which is pretty sombre, as there was never much communication regarding how deep those would run.”

Kerry Morrison, CEO of Toronto software developer Endloop Mobile, was recently invited to a BlackBerry developer outreach event and says he’s glad he didn’t go. “They had one hope – one – and that was to make BB10 the greatest thing since sliced bread and get it out on time. Clearly, they have failed. There’s just no way now to pull out of the death spiral,” he said. “With stiff competition and a complete lack of marketplace trust, zombie Steve Jobs couldn't fix RIM.”

RIM’s executives, meanwhile, say they plan to continue, slimming down and refocusing the company. On a conference call, Mr. Heins emphasized the positive momentum in certain international markets, but the overall mood surrounding the company – not optimistic to begin with – took a much darker turn on Thursday: “God. ... It just seems kind of sad,” a former RIM executive said as he took in the developments on Thursday evening. “Companies have come back from the grave. Apple has done it. There’s no reason RIM can’t. They just have to show better leadership over the next few months.”

With files from Josh O'Kane and Steven Chase

Follow on Twitter: @iainmarlow

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