by Tom Taulli | June 28, 2012 5:47 pm
Even though Research In Motion’s (NASDAQ:RIMM) stock is down 68% over the past year, it looks like Wall Street underestimated the problems. On news of the fiscal first-quarter report Thursday evening, the stock price is down 17% in after-hours trading. There is actually nothing positive in the announcement.
RIM’s loss was $518 million, or 99 cents per share, with revenues at $2.8 billion. The consensus forecast was for a loss of only a penny. Consider that during the same period a year ago, RIM clocked earnings of $1.33 per share and revenues of $4.91 billion. Shipments were also 11.1 million handsets. But in the latest quarter, they were a pathetic 7.8 million.
To deal with the dire situation, the company plans to cut 5,000 jobs by the end of the fiscal year, which is about a third of its workforce. And this may not be enough. The problem is that RIM’s already-delayed BlackBerry 10 smartphones won’t be on the market until the first quarter of 2013 (yes, another delay and another Christmas season missed). But in light of the company’s former promises, this may just be more hot air.
Of course, RIM’s rivals — which include Samsung, Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) — will capitalize on the situation. They seem to have few problems building new devices and cool software. More important, they have a knack for understanding what customers really want.
So, when the BlackBerry 10 models finally do come to the market, it will be a nonevent. People will have already forgotten the brand.
Something else: RIM has completely missed the huge market for tablets. Simply put, the BlackBerry PlayBook has little to make it interesting to customers.
Oh, and the competition is heating up. Microsoft (NASDAQ:MSFT) is planning to launch its own tablet, called the Surface, which should get lots of traction in the corporate market. And as of this week, Google launched its own tablet, called the Nexus 7. It looks like a winner, especially since it retails for only $199.
For investors, there’s an important lesson here. That is, when a company fails to innovate — as has been the case with RIM — the consequences can be severe. It’s a simple concept, but it always holds true. Tech companies need to constantly reinvent themselves. There’s just too many options for customers nowadays.
True, some tech companies have made surprising comebacks. Besides Apple, there’s IBM (NYSE:IBM). The problem is these are outliers. For the most part, tech history is littered with former darlings, like Nortel, Wang, Kodak, WordPerfect and so on.
For RIM, the most viable option is to quickly sell its assets — before they go to zero. This means finding buyers for the manufacturing systems, the current customer contracts and the patents.
Unfortunately, RIM probably won’t get good valuations on the sales. How could it when the company is in desperation mode?
All in all, RIM’s stock is toxic for investors. As of now, this company is mostly a horror show — which will probably just get worse and worse.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of the upcoming book How to Create the Next Facebook: Seeing Your Startup Through, from Idea to IPO. Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.
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