RIM expected to announce massive layoffs this week
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With fewer and fewer people buying BlackBerry smart phones, Waterloo-based Research In Motion has apparently decided it needs fewer employees to make, design and sell them.
For the second time in a year, the company is expected to announce it’s laying off a major chunk of its workforce, perhaps as early as this week.
A RIM spokesperson wouldn’t comment on published reports, which suggested the cuts could range anywhere from 2,000 to 6,000.
One veteran tech analyst said roughly 5,000 employees will be cut in phases over the next six months in almost every area of the company. The sole exception, predicted the analyst, would be anyone working on BB10 or the qnx software it’s based on.
After RIM’s most recent quarterly earnings, where the company announced a loss of $125 million, CEO Thorsten Heins suggested that RIM needed a shift.
“It is now very clear to me that substantial change is what RIM needs,” said Heins, who also spoke of improving efficiency in the production process and supply chain, in particular, in an effort to save $1 billion by the end of 2013.
With some estimates suggesting RIM’s share of the worldwide smart phone market could drop below 5 per cent this year, axing well over 10 per cent of the company’s global workforce of 16,500 is crucial, say analysts and investors.
“I think they need to come down to 12,000,” said activist investor Vic Alboini, president and CEO of Jaguar Financial, who agitated for the removal of former co-chairs and co-CEOs Jim Balsillie and Mike Lazaridis. Lazaridis is currently vice-chair; he and Balsillie stepped down in January as co-chairs and co-CEOs.
One source close to the company told Reuters news agency the impending layoffs could hit as many as 6,000 people and affect RIM’s legal, marketing, sales, operations, and human resources divisions.
“The strategic question is: are you accelerating into a better future or shrinking to a niche operation,” said the source, who declined to be identified due to the sensitive nature of the job cuts.
The company needs to buy itself some breathing room before the launch of phones running its long-awaited BB10 operating system, expected to be released some time in the fall, says analyst Kevin Dede of Auriga USA.
“It makes absolute and perfect sense to make cuts. There are going to be a few quarters until BB10 is launched, then it’s going to be a few quarters to roll out BB10 to all the regions where it will matter,” said Dede, who added it has likely taken Heins this long to figure out just where to cut after taking over in January.
If the company streamlines the number of phones it offers, it could easily cut engineering and manufacturing staff, suggested Dede. BB10 phones will likely remain the company’s high-end offering once they’re launched. But on phones running the current BlackBerry 7 or BlackBerry 7.1, there’s no need to have scores of models as they do now.
“If I were them, I’d have maybe two phones on BlackBerry 7 and two phones on BB10. The entry level, cost-effective ones, and the high end. There’s no need to have more than that,” said Dede, who pointed to similar steps by Steve Jobs when he rejoined Apple in the early 1990s.
“They were all over the place. He was able to cut it right down,” Dede said.
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