Amidst a swirl of top level executive departures, RIM announced the company's first quarterly loss since 2006 on Thursday evening. The earnings report, covering both RIM's fiscal Q4 2012 and its full year, which ended on March 3, 2012, didn't necessarily disappoint - it was more a case of RIM meeting financial expectations. RIM's global business remains fairly robust, however the North American market - which is the key and much larger driver for RIM's business overall, continues the downward spiral that is the root cause of the company's troubles.

 

 

Though the company managed to add about 2 million new active users - raising its subscription total to 77 million, it failed to sell a significant number of its core smartphone products. BlackBerry smartphone shipments totaled only 11.1 million units in Q4, down 21 percent from Q3, a significant drop, and clearly an indication that RIM's devices are not capturing the imagination of users in either the consumer or enterprise space. During the quarter, RIM also shipped just over 500,000 BlackBerry PlayBook tablets, nearly all of them original model PlayBooks (running the original version of its QNX-based OS and lacking Android support).

 

In light of its financially disappointing quarter, RIM also announced that it will discontinue providing financial guidance. The company's new President and CEO, Thorsten Heins, made it clear that there is a great deal of strategic work ahead for the company and that its fiscal 2013 year will be a difficult one from a strategic perspective - but also one that will be difficult in terms of being able to accurately predict financial performance.

 

Q4 2012 revenue was $4.2 billion, down 19 percent from $5.2 billion in the previous quarter and down 25 percent from $5.6 billion in the same quarter of fiscal 2011. The revenue breakdown for the quarter was approximately 68 percent for hardware, 27 percent for services and 5 percent for software and other revenue. Revenue for the full 2012 fiscal year ended March 3, 2012 was $18.4 billion, down 7 percent from $19.9 billion in fiscal 2011.

 

"The business challenges we face over the next several quarters are significant and I am taking the necessary steps to address them," said Heins. "In addition to delivering the BlackBerry 10 platform and refocusing resources on RIM's key opportunities, such as BlackBerry Mobile Fusion and new integrated service offerings, we will also drive greater operational performance through a variety of initiatives including increased management accountability and process discipline. In parallel, we are undertaking a comprehensive review of strategic opportunities including partnerships and joint ventures, licensing, and other ways to leverage RIM’s assets and maximize value for our stakeholders."

Of particular note, Heins also noted that greatly scaling back on consumer operations and reinvigorating enterprise efforts is a critical top-of-mind issue.

 

According to Heins, key factors contributing to RIM's decision to suspend issuing guidance include ongoing weakness in the company’s U.S. smartphone business, an increased focus on selling BlackBerry 7 smartphones to grow the subscriber base in advance of the BlackBerry 10 launch, increasing competitive pressure in the Company’s international markets and the introduction of certain new lower tier service pricing initiatives and a higher mix of sales coming from entry level products.

 

 

No doubt a surprise to many in both the financial and mobile technology worlds, Jim Balsillie, one of the former Co-CEOs of the company, announced that he has resigned as a Director on the Company’s Board, fully severing his relationship with RIM. "As I complete my retirement from RIM, I'm grateful for this remarkable experience and for the opportunity to have worked with outstanding professionals who helped turn a Canadian idea into a global success," Balsillie said.

 

Much more importantly in our view, David Yach will be retiring from his role as CTO of Software after 13 years with RIM, as Jim Rowan, COO of Global Operations, has decided to pursue other interests. The company is currently undertaking a search to hire a single COO with responsibilities to run the all of RIM’s operations, as well as a new CMO to handle all global marketing.

As we've often noted elsewhere (see for example, "RIM Goes Bold with Great News"), one of the key issues RIM needs to solve is to bring in new outside management blood that can "re-imagine" RIM from the ground up. New management is also what's needed to fully eliminate a lot of internal fiefdoms that have been at odds for too many years, especially those on opposite ends of RIM's internal and harmful consumer-enterprise debate.

 

Heins clearly has his work cut out for himself. The good news is that he acknowledges this to be the case. When the news of his hiring was first announced he made careful statements about "staying the course," which gave many analysts pause. It's now clear that he understands a new course must be charted.