RIM delays BlackBerry 10, reports plummeting sales

IDG News Service - Amid stiff competition from the likes of Google and Apple, Research In Motion is planning a series of sweeping changes that will see the company delay a key update to its BlackBerry operating system, reduce the number of phones it sells, and shed almost a third of its employees.

BlackBerry 10, the next major upgrade to the company's iconic smartphones, was due sometime before the end of the year but now won't see a release until the first quarter of 2013 due to delays in completing the software, the company said Thursday.

The delay was announced as RIM reported sharply lower revenue and a loss for the March-to-May quarter. Revenue was US$2.8 billion, down from $4.9 billion a year earlier. The company reported a net loss of $518 million against a profit of $695 million a year earlier.

Also on Thursday, RIM announced it would eliminate approximately 5,000 jobs as part of an ongoing restructuring. The layoffs, which represent 30 percent of RIM's 16,500 workers, will take place over the next nine months, the company said.

"It is necessary to change the scale and refocus the company on areas of highest opportunity," said Thorsten Heins, RIM's president and CEO, in a conference call with analysts.

Part of that refocusing will include RIM cutting the number of phones it offers users. That will reduce research, development, marketing and sales costs, said Heins.

Research In Motion will also look at licensing its operating system to other companies. While Apple has kept its operating system on its own devices, both Google and Microsoft license their software to phone makers, resulting in a larger number of phones available to consumers.

The results did not come as a total surprise. The Canadian smartphone maker said in May that it would probably post an operating loss for the March-to-May quarter, but at the time it didn't hint at how steep the drop-off in business would be.

RIM's poor performance is largely due to the competitive market for smartphones.

The company is being squeezed by Apple, Google and Microsoft, all of which are wooing consumers and business users with upgrades to their phone operating systems.

One of the results of this has been a sharp drop in sales of new RIM devices. During the quarter, shipments of BlackBerry smartphones dropped by almost half to 7.8 million units.

With the BlackBerry 10 software delayed, RIM will now have to work harder convincing users that it's worth putting off the purchase of a new phone and sticking with BlackBerry until its software is ready.

RIM's delay means BlackBerry 10 won't hit the market until after the launch of Microsoft's Windows Phone 8 and an expected new phone from Apple.

"It's obviously not good news." said Carolina Milanesi, an analyst with Gartner. "They need something in the market as quickly as they can, to get people back on the enterprise side and not to leave the door open to Windows."

But there are advantages to delaying BlackBerry 10.

"A worse thing would be to come to market next quarter but have a disaster because the software is not stable enough. They've obviously done this after thinking about it quite carefully," she said.

Looking ahead, the company doesn't see an immediate recovery.

RIM expects to post a further loss in the current quarter, the period from June to August, it said.

Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com