How the 'CrackBerry' cracked

BlackBerry's owner has called in bankers to conduct a strategic review and there are fears about thousands of job losses at the smartphone maker

The bad news from BlackBerry owner Research in Motion just gets worse, as the Canadian group has warned of an operating loss in the second quarter to June. RIM, once the darling of the smartphone industry before being eclipsed by Apple and Samsung, appears to be waving the white flag as it has hired JP Morgan and RBC Capital to carry out a strategic review.

Thorsten Heins, the chief executive, who has been in the job only four months after taking over from the long-serving co-chief executives Mike Lazaridis and Jim Balsillie, has warned of "significant" job cuts.

His decision to seek the advice of the banks suggests he feels that RIM's ability to help itself may befast running out.

Poor products, technical and network faults, a clunky software operating system, and a failure to embrace tablets are just some of its problems.

The options seem to be limited:it could put itself up for sale, strikea licensing deal, tie-up with another partner or tap the stock market for cash.

Research in motion: The options

Sell

Industry analysts have speculated for at least a year that RIM is "in play". Asian technology giants such as Samsung, HTC or LG have all been mooted as being interested. Amazon, the maker of the Kindle e-reader, above, might also come back for another try after RIM rebuffed an approach last summer.

It's important to remember RIM has a customer base of 78 million and a BBM (BlackBerry Messenger) user base of 56 million. Millions of business people rely on their BlackBerrys every day.

Another attraction is RIM's array of patents that could still be sought after by a fast-growing new tech player. That was a key motivation for Google's recent purchase of mobile firm Motorola.

However, bidders have kept their distance from RIM and the share price, which was down 7 per cent yesterday on news of the strategic review, tells its own story. The market sees no buyer.

But the 90 per cent slump in the shares since 2008 means RIM looks quite cheap at $C6bn (£3.75bn).

Licensing and partnerships

Some sort of licensing deal or joint venture might appeal to another company as a new partner would not have to stump up a lot of cash. JP Morgan and RBC are said to be making this a key focus of the strategic review.

Any marriage would likely see RIM as the junior partner given its parlous and weakening position.

But RIM's security technology is regarded as the best in the market, which is why it remains the favoured tool for police, government and military use in countries all over the world.

The problem is that time is short for BlackBerry. As the months go by, the risk is that RIM's proprietary technology appears to fall further behind rivals such as Apple and Samsung.

Other mobile operating systems have swept the market. RIM has 80,000 apps in its store, and 15,000 for its PlayBook tablet, compared to Apple's iOS and Google's Android, which respectively have 650,000 and 500,000 apps in their stores. RIM has belatedly embraced touchscreens with its forthcoming (and delayed) BlackBerry 10 handset which does not have the trademark "external" mini-keyboard.

"BlackBerry 10 is the last chance saloon for RIM," warned Dexter Thillien, an analyst at IHS Global Insight.

Raise cash

The chief executive Thorsten Heins said the banks are looking at the "feasibility of various financial strategies", but a fundraising seems an unlikely avenue given RIM had C$2bn of cash and equivalents on the books, although any loss will eat into that buffer.

Shareholders, who have already lobbied for a change of management and strategic review, are desperate for any cash. The activist investor Jaguar Financial Corp has called for a sale of part of the company – such as the handset business and network services operation – to provide a return to shareholders. But so far no buyer has emerged.

Keep calm and carry on?

Arguably this is the position that RIM has been clinging to for months now – bar the change in chief executive and a few less than glittering product launches.

High-profile flops such as the Playbook, RIM's failed answer to iPad, keep chipping away at its brand equity. Only diehard fans are hopeful the BlackBerry 10 can change things.

"The delay in getting it to market is a major drawback for the company," says Mr Thillien.

Even then "the example of Nokia and the Lumia show that launching a good device is not enough in today's market, but that any new device needs to be compelling and offer the right ecosystem alongside the hardware", he said.

The worst-case scenario is that RIM's woes persist. Mr Thillien added: "Competitors may wait for the company to go under and acquire its most compelling assets at a knock-down price, as happened with fellow Canadian company Nortel."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18000 per annum: Recruitment Genius: A position has arisen within th...

Ashdown Group: Development Manager - Rickmansworth - £55k +15% bonus

£50000 - £63000 per annum + excellent benefits : Ashdown Group: IT Manager / D...

Recruitment Genius: Security Officer

£16500 per annum: Recruitment Genius: Applicants must hold a valid SIA Door Su...

Ashdown Group: Business Analyst - City, London

£50000 per annum: Ashdown Group: Business Analyst - Financial Services - The C...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss