There is no Market Research Poll Currently Running.
TORONTO - Shares of Research In Motion (TSX:RIM) are expected to take a beating today as investors react to the BlackBerry-maker's dismal earnings results and another delay to its new smartphones.
RIM stock tumbled almost 14 per cent in pre-market trading in New York, losing US$1.24 to US$7.89 — a strong indication of how investors will react when the market opens in Toronto.
The Waterloo, Ont.-based company also said it would lay off a third of its workforce — or about 5,000 employees — to contain costs as it pushes ahead with a complete revamp of the BlackBerry operating system.
The announcements came as a shock because the company had insisted it would release new phones by the end of this year.
The company, which reports in U.S. dollars, posted a loss of US$518 million or 99 cents per share for its latest quarter, steeply missing analyst expectations.
The results marked a decline from the profit of $695 million or $1.33 per share a year ago.
Chief executive Thorsten Heins told analysts on a conference call that he expects the company will face further pressure on its financial results over the next several quarters.
The new BlackBerry 10 operating system and phones have widely been considered a last-ditch effort to save the company, which has lost a significant portion of its marketshare to competitors like Apple's iPhone and devices using the Android operating system.
At least one analyst questioned how RIM could successfully execute the release of its new phones amid mass layoffs.
"We think execution risks will continue as RIM plans to lay off 5,000 of its 16,500 employees by February while at the same time launching its most pivotal product in the company's history," Jeffries analyst Peter Misek said in a note to clients.
"We believe the BB10 pushout decision was recent and leaves RIM with inferior products in an increasingly competitive and saturated smartphone market."
Rumours have circulated for months that a potential buyer could swoop in and pick up the company, and when nobody appeared to be interested, questions emerged over whether Heins would decide to put a chunk of RIM up for sale — most likely its struggling hardware division.
Heins has repeatedly said that selling the company is farthest from his mind.
Misek said he believes it's unlikely RIM will be bought before the launch of BB10 and lowered the target price on the stock — which he rates as underpeform — to $5, down from $10.
Another analyst questioned if BB10 would ever see the light of day.
"At this point there is a chance that we may never see a BB10 handset given RIM’s track record," wrote National Bank analyst Kris Thompson in a note.
"RIM is intent on launching a 'distinct' smartphone platform; all we see at this point is an extinct platform. Are consumers and enterprises really going to wait for another platform? No!"
Thompson upgraded his shares to a "sector perform" on the basis that the company could be broken up and sold for $8 per share, based on its cash holdings and intellectual property.
Click here to report a typo or error
You must log in to add comments.
Create a new account
Remember me next time.