Research in Motion Ltd. Tuesday announced a 10 per cent cut in its workforce in order to shore up short-term revenue and long-term market stability.
“”It depends on what you consider bad news or good news,”” said RIM chairman and co-CEO
Jim Balsillie of the cuts. “”The purpose of these cuts is really to give streamlining and efficiency to our business.””
Balsillie said about 85 per cent of the Waterloo, Ont., company’s 2,200 workforce are in Canada. That works out to approximately 187 Canadian jobs lost. According to Balsillie, no particular department was isolated and the cuts will occur throughout the organization.
RIM is expecting a “”special pre-tax charge”” of $8 million to $9 million in the third quarter of fiscal 2003 and anticpates long-term savings due to cost cutting measures to be in the realm of $20 to $25 million per year.
The poor state of the IT economy has taken its toll on RIM, said IDC Canada Ltd. analyst Warren Chaisatien, but its position in the wireless market has become precarious due to the growth of competition in the last few years.
“”Two years ago, RIM was still standing. They were unique in delivering wireless e-mail. Now, Palm, Microsoft’s Pocket PC, even cell phone manufacturers — everyone can do it,”” said Chaisatien. “”So all of a sudden the market gets really crowded and the competitive advantage that they used to enjoy is now gone.””
Balsillie insisted that layoffs and financial restructuring won’t have an impact on the company’s R&D cycle. RIM is, however, licensing its technology to other industry players and deals of this nature are “”becoming an increasing and reasonable part of our revenue.””
Licensing agreements with Nokia, Palm and Handspring were announced in the past week. Nokia now has the right to distribute certain BlackBerry software on its cell phone devices and Palm has licensed RIM’s keyboard design. Handspring signed a similar keyboard agreement, but as part of an out-of-court settlement following a RIM lawsuit.
Chaisatien said he wasn’t sure if such agreements could help RIM offset its financial woes, but it’s a sign that “”they realize they don’t have to play every role in that marketplace . . . the licensing movement, I would say, is a case in point.””
“”We’re not trying to be all things to all people,”” agreed Balsillie. The wireless market will become more fractured, he said, particularly with the rise of 2.5 G. “”It’s not like the cell phone, where pretty much one size fits all. In data there’s going to be substantial segmentation.””