The shoe dropped at Research in Motion Ltd. (TSX: RIM) Monday as the embattled Waterloo, Ont.-based smart phone manufacturer announced plans to lay off 2,000 employees globally across all functions and also announced the retirement of a member of its senior leadership team, COO Don Morrison.
Impacted RIM employees in North America will be notified this week, with global notifications to follow. Costs of the layoff, which will reduce RIM’s overall workforce to 17,000, were not included in RIM’s second quarter outlook and will be communicated when the company releases its Q2 results on Sept. 15.
RIM has been struggling to contain costs and hold market share in the increasingly competitive smart phone space, where competition from Apple’s iPhone and handsets based on Google’s Android operating system has challenged RIM’s one-time dominance. The cuts amount to a 10 per cent reduction in RIM’s workforce.
In a statement, RIM said the cuts are “focused on eliminating redundancies and reallocating resources to focus on areas that offer the highest growth opportunities and alignment with RIM’s strategic objectives. The workforce reduction is believed to be a prudent and necessary step for the long term success of the company and it follows an extended period of rapid growth within the company whereby the workforce had nearly quadrupled in the last five years alone.”
While details of the cuts have yet to be released, Jon Arnold, analyst and principal with J Arnold & Associates in Toronto, said he wouldn’t be surprised to see them focused on RIM’s consumer business.
“Everyone can see RIM is backed into a corner in a way,” said Arnold. “They’ve created a technology that pretty much invented the market for the enterprise especially, but the market has just continued to evolve and mature beyond the core value proposition the BlackBerry was invented for.”
It goes back to RIM’s original value proposition: a secure, enterprise-focused messaging device without “distractions” such as games or a camera. RIM has been challenged, said Arnold, by the growth of the consumer smart phone market and the fact consumers are increasingly driving the buying decision, even in the enterprise market, and are demanding those distractions.
“The cuts are reflecting the fact that, whether they like it or not, they’ve had to compete as a consumer brand. I think, if they’d had their druthers, they wouldn’t have touched that market,” said Arnold. “RIM is coming up against the reality it won’t make it as a big-time consumer brand. It’s just too difficult.”
While retreating from the consumer market entirely would be a bold (and unlikely) move, Arnold said he expects RIM will temporarily retreat on the consumer side and attempt to reinvent itself for a final attempt at consumer relevance.
“We’ll see if they can reinvent themselves one more time bit there’s not much rope left in that space, and there’s not a strong pull from consumers,” said Arnold.
In addition to the reductions, RIM also announced a shuffle of its executive ranks. Announcing his retirement is COO Don Morrison, a 10-year veteran of the company. Morrison had been on temporary medical leave. A veteran of AT&T and Bell Canada, he joined RIM in 2000 to build its international operations.
Morrison’s departure triggered a number of executive changes. Thorston Heins takes on the expanded role of COO, product and sales and Jim Rowan will take on the expanded role of COO, operations. Several other executives will also take on more responsibility.
The changes won’t impact the roles of RIM co-CEOs Mike Lazaridis and Jim Balsillie, whom some critics have called on to step back from day-to-day management of the company as part of any restructuring.
Follow Jeff Jedras on Twitter: @JeffJedrasCDN.
For more, see: Crisis at RIM.