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BlackBerry’s Uncertain Future, Trembling Stock Value

The woes for Research in Motion, the makers of BlackBerry, continue. This weekend RIM announced that their second quarter profits had dropped 59%, driven down partly by lower demand for the older phone models.

Net profits fell to $329m for the three months ending 31 August, down from $797m in the same period a year earlier.

Back in July, the company announced that it was cutting more than 2000 jobs, which is 11% of its total workforce. The company incurred one-time charges of $118 million to cover the costs of the layoffs which contributed to the lowered profits.

During the quarter, RIM shipped some 10.6 million Blackberry smartphones and about 200,000 Blackberry PlayBook tablets, which were below its own prediction of 11 – 12.5 million smartphones and the 500,00 PlayBooks that were sold in the first quarter. The sales missed very conservative analyst estimates as well.

Analysts are painting a worrying picture for the company. Market shares for RIM are on the decline in the US, UK and throughout Europe due to intense competition from iPhone and Android smartphones.

Stocks plunged as much as 23% after the announcements and investors are threatening to drop shares unless steps are taken to secure the future of the company.

Revenues in Q2 fell 10% to $4.17 billion but in an outlook for its current fiscal third quarter, the company said it expected revenues ranging from $5.3 billion and $5.6 billion and BlackBerry smartphone shipments between 13.5 million and 14.5 million units.

In a conference call with analysts, Co-CEO Mike Lazaridis said that the newer BlackBerry Bold, Torch and Curve phones only had a few weeks of sales before the second quarter ended and strong sales of these smartphones were expected.

“We understand that the past few quarters have been challenging, we are confident that we are on track to return to growth in Q3 and beyond.” he said.

RIM has planned a software upgrade for the PlayBook in October as well as introduction of phones based on its QNX OS in 2012.


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