RIM Expects Operating Loss as Bankers Help Company Explore Options
Research In Motion, the troubled Canadian company that makes the BlackBerry line of smartphones, just announced that it expects an operating loss in the quarter ending June 2. — The company also said it has hired J.P. Morgan …
Context & Ripple Effects
The warning caps a brutal spring for Research In Motion. In late March the company reported a Q4 miss that took out Balsillie along with its CTO and COO, and within days the Wall Street Journal had RIM weighing bleak options. Since then management has been rebuilt around outsiders — Sony Mobile's Kristian Tear as COO and Frank Boulben as CMO in early May — while the BlackBerry 10 UI previewed at BlackBerry World was pitched as the turnaround product.
What changed today is that the board stopped treating this as an execution problem: RIM pre-announced an operating loss for the quarter ending June 2 and confirmed it has hired J.P. Morgan (with RBC, per the Wall Street Journal) for a formal strategic review. Bloomberg flags roughly $1 billion of inventory at writedown risk. The story travelled unusually wide on day one — Bloomberg, WSJ, The Verge, GigaOM, CNET and ZDNet all picked it up — which itself signals how much option-value the market sees in the company's assets.
First-order effects
- RIM's June-quarter guidance turns the strategic review from contingency into necessity: with an operating loss and inventory-writedown risk flagged by Bloomberg, the J.P. Morgan/RBC mandate covers everything from licensing BlackBerry 10 to asset sales.
- The thousands of additional layoffs in the confirmed global restructuring plan land on the same workforce that just absorbed the March executive purge, deepening execution risk ahead of the BlackBerry 10 launch.
Second-order effects
- Any suitor or licensee now prices against a guided loss rather than trailing results, weakening RIM's negotiating hand even as the review formally opens the door to partnerships it previously resisted.
- Enterprise customers and carriers who stuck with BlackBerry for security and manageability get a concrete trigger to accelerate dual-sourcing toward iOS and Android deployments, eroding the installed base that underpins any licensing deal.
Third-order effects
- If the pattern holds, RIM becomes a test case for whether a hardware-centric incumbent with a valued but sub-scale OS can survive as a licensor, or whether the endgame is consolidation of its patents and enterprise assets by stronger players.
- The episode reinforces the post-2007 structural rule visible across the sector: smartphone platforms that lose developer and carrier momentum get repriced as portfolios of patents, spectrum of talent and niche franchises rather than going concerns.
The trend: Smartphone incumbents that miss the platform transition are increasingly forced from self-help turnarounds into banker-led strategic reviews, where the outcome is licensing, breakup or sale rather than recovery.