RIM May Need To Write Off $1 Billion In Inventory

benfrog writes "Blackberry maker Research in Motion may need to write off more than $1 billion in inventory, according to Bloomberg. The potential 'writedown' comes after RIM took a $485 million pretax charge to write down the value of its PlayBook inventory in December. RIM has said it aims to save $1 billion in operating costs this fiscal year by cutting its number of manufacturing sites and is 'reviewing its organizational efficiency' across the company, which may lead to job cuts of 2,000-3,000. Its shares have tumbled 75 percent over the past year and are down 90 percent from their all-time high."

Comments

HP should buy them

[Enderandrew]

HP is convinced they need to embrace the 'post-PC' world. They could actually salvage part of their 2 billion investment of Palm and Web OS. BB has a terrible platform right now and is dying, but they have a great brand name, and some great apps. Their mobile email client is absolutely the best.

If HP was smart, they'd reach out to Google to help develop Android phones and tablets with some Web OS influence (some great UI concepts actually) and a BB email client. Honestly, wouldn't that be a legit Apple killer than enterprise shops would embrace en-masse?

Re:HP should buy them

[Jeng]

If HP was smart,

They've outsourced their intelligence to the lowest bidder.

Re:HP should buy them

[Eponymous Coward]

Almost the entire WebOS team has been hired by Google. I don't think HP is doing anything with WebOS anymore.

Re:HP should buy them

[Archangel Michael]

The problem with Blackberry is that it required (at one point) a server component for Enterprise. And it was EXPENSIVE (at the time). Meanwhile Apple used ActiveSync and now Android does as well, which allows for "security" that most enterprises actually need.

However, what is MISSING that Blackberry had YEARS ago was app management that is still better than anything Apple or Google offer. We are actively looking at MDM that can manage Apple and/or Android and so far, we've got nothing worthwhile to choose from. Apple's MDM is pretty good, but it is based on Apple's model, and not any enterprise.

If HP or any other company wanted the Enterprise market for Smart Devices, they could be had in a second. My guess, is the market is too fluid to build anything that will work in three years.

That, and the whole BYOD in the enterprise is really starting to take off. Why pay for smartphones when your employees will buy something else anyways (and not want what you bought)?

Re:HP should buy them

[LordLucless]

What does HP have to offer though? Google already has all the people who did WebOS. Who should Google work with at HP? The middle management?

Re:HP should buy them

[sootman]

> Honestly, wouldn't that be a legit Apple killer than
> enterprise shops would embrace en-masse?

No.

The thing is, to dethrone a king, you can't be "about as good as" or "as good as and slightly cheaper" or "10% better in some key ways" or even "15% better across the board." You have to be a LOT better--like a night-and-day different--to overcome all the inertia of a large installed base. The last time we saw that happen was in 2007.

Apple might not have the absolute world's best email client but pretty much every major company is happy with it (and all the other stuff it does) so someone else coming out with a whole new device that is slightly better in some ways is not going to gain any traction. Apple is so far ahead (in terms of overall quality, customer satisfaction, number and quality of apps, etc.) that I'm guessing it'll be literally 5-10 years (if ever) before they aren't in the lead.*

HP and BB both tried to displace Apple once and failed. They pulled out all the stops and each managed to create products that were roughly comparable to 1- or 2-year-old Apple products. No freaking way will those two be able to put their corporate heads together and produce, in 12-24 months, something substantially better than what Apple will be producing at the same time in the future.

Tying two anchors together does not result in something that floats.

* They may or may not be actually leading now in terms of raw units out there in the world, but a) they're doing far better than any single competitor in the smartphone arena, and b) they are taking the vast majority of the industry's profits -- about 3x their one and only really profitable competitor.

Translation

[mr1911]

by cutting its number of manufacturing sites and is 'reviewing its organizational efficiency' across the company, which may lead to job cuts of 2,000-3,000.

No need for manufacturing sites or employees when sales have fallen off a cliff.

RIM may be in freefall

[Baloroth]

RIM still made $3.64 billion in revenue last year, for $197.5 million in profit (a huge drop from last year, but they are still making money). RIM definitely could still succeed, but not like this. They are still a massive company with a huge name-brand, they just need to figure out how to use that. It may be unlikely, but I wouldn't mind seeing them succeed: more competition in the smartphone industry could be a very good thing. I'd hate to see it turn into a pure Android/iOS duopoly with no chance of a third competitor (Windows Phone... doesn't really count).

Re:What's With All The RIM Hate?

[tibit]

Apparently, Blackberry-the-smartphone is not enough to keep RIM afloat. There you go.

Re:What's With All The RIM Hate?

[MadCow42]

RUFKM?

Do you even have a current BB phone? I do, and I hate it with a passion, but I'm stuck with it because it's all my company supports for corporate email.

Battery life? half a day if I'm lucky.

Usability? It freezes for minutes at a time.

Apps? Really? Have you compared to any other platform like Android or iOS?

Talk about astroturfing... you're doing it pretty well.

(no, I have no affiliation with RIM whatsoever, besides being hampered by having one of their crappy devices - the 9960)

Amazing amount of mismanagement

[Y-Crate]

NY Times

Since 2007, RIM has introduced 37 models. The company, in a statement, said it did not know how many models were on the market.

Adding to the shopping confusion are RIM’s product names, which generally rely on four-digit model numbers and sometimes have different products sharing a name. The BlackBerry Torch 9850 and 9860 are touch-screen phones that are on some shelves next to the BlackBerry Torch 9800 and 9810, touch-screen phones with slide-out keyboards. (The model number differences reflect models adapted for different cellphone systems.)

By contrast, Apple has introduced only four iPhones since 2008 and all were basically the same phone with differences in the amount of storage, or upgrades from older models.

Ironic that RIM is losing-out to the likes of Apple, by making the same mistake Apple did back in the dark days of the '90s, when it seemed like there was a new Performa out every week.

Re:Amazing amount of mismanagement

[PCM2]

Ironic that RIM is losing-out to the likes of Apple, by making the same mistake Apple did back in the dark days of the '90s, when it seemed like there was a new Performa out every week.

Exactly this. When Jobs came back to Apple, he drew a box on a whiteboard and drew a cross through it. Four quadrants: Pro/Consumer on top and Desktop/Portable along the side. Instead of all these crappy Performas and 4400s and what-not, Apple relaunched with four computer products, grand total. Those were iMac/Power Mac G3 and iBook/PowerBook.

Why can't RIM do this? It could probably get away with two models: BlackBerry (which has a nicer camera, movie player, and integrates nicely with Facebook) and BlackBerry Pro (which has slightly nicer build quality and some kind of easy VPN capability, or something). Model numbers disappear -- they just upgrade the hardware every year or two. It would go a long way to address the problem of sitting on too much inventory.

Then launch it with a decent TV ad campaign. "Imagine a phone... blah blah blah ... introducing the new BlackBerry, from Research in Motion." And then, when customers go to the store, they just tell the clerk "I want that new BlackBerry." Clerk hands him a box that says "BlackBerry" on it. Simple.

Never happen.

Inventory

[PCM2]

"Organizational efficiency" certainly sounds like job cuts. But hopefully it means RIM might take a look at its manufacturing efficiency, as well.

At Apple, Steve Jobs always invested heavily in modern, automated assembly lines for its products, because he realized that the problem of too much inventory is particularly risky for computer makers. If you think about it, technology products have relatively short shelf lives. You can't sit on a pile of inventory and sell it for the next few years, like you could if you were making hammers or dinner plates. By next year, your inventory of shiny gadgets might effectively be junk. So the key is to develop a manufacturing process -- and equally important, supply partnerships -- that allow you to manufacture products at an incredibly fast rate, so that you can respond to market demand rapidly. If the market wants tons of units, ramp up production. When it cools off, stop making more. Then you don't have to sit on so much inventory.

If RIM is sitting on $1 billion in inventory, it certainly sounds like it grossly overestimated the demand for some of its products at launch. But it also suggests that it either isn't paying close enough attention to the market numbers, or is unable to react quickly enough to them. Working on either one might save it some money.

Re:What's With All The RIM Hate?

[Nexzus]

In the end, they will probably file chapter 11 and leave the debt with the US taxpayers.

I know it's hard to believe, but RIM is a Canadian company.

Re:What's With All The RIM Hate?

[epiphani]

Funny, I have a current Bold 9900, and the battery easily lasts a full day with heavy email use and several hours of conference calls. I'm not sure what you're using, but I haven't run into the issues you're talking about since the original Bold like 4 years ago.

Re:What's With All The RIM Hate?

[PCM2]

I don't hate RIM. But I do think RIM is dying. The disease is reversible, I think, but nobody over there seems to be seriously looking for a cure. TFS says RIM stock is down 75 percent from last year alone. Imagine a patient who has lost 75 percent of his body weight but keeps insisting, "I'm not sick!"

My own experience: My last three phones before my current one were BlackBerrys. But I started looking around and comparing prices and it seemed to me that other phones could provide at least most of the functionality that my BlackBerry gave me, plus more besides. I also wasn't impressed with the hardware of the current crop of BlackBerry devices. It seemed like RIM's focus had drifted from its core business market and it was trying to sell camera phones to college students. They didn't seem like they were targeting me anymore, and other manufacturers were. So I switched to Android.

I'd be more than happy to switch back to BlackBerry if they'd show me a really great phone, though. Do they have something like that in the works? I don't see it. The market doesn't seem to see it, either.

You know who you remind me of? Me, when I was a Mac OS admin in the late 90s. Back then, everybody thought Mac users were a cult. We were all convinced our platform was the best, but everybody else kept focusing on how Gil Amelio had fucked up a once-great company. We Mac fans were right, but so was everybody else. It took Steve Jobs' return to get Apple back on track. Unfortunately, I don't think RIM has a Steve Jobs.

TERRIBLE writeup

[Scareduck]

From TFA:

The value of the company’s inventory climbed to $1.03 billion last quarter, up from $618 million a year earlier. Back in mid-2008, when the BlackBerry was still a hot seller and RIM’s stock traded at an all-time high of $147.55, the figure was less than $500 million.

Nowhere in that article does it suggest that 100% of the current inventory will have to be written off. A terrible writeup from someone who clearly has reading comprehension problems.

Re:Not Surprising

[norfolkboy]

Not quite.

It's very popular in the UK for teens, who use BBM rather than SMS.

Other than poor chavs and kids, you're right.

Re:Not Surprising

[Anne Thwacks]

Perhaps you live in America?

Here in the UK, BB ownership is very high. However, most users also have another device.

There are two BB communities:

Teenagers, who want BBM for a variety of reasons, and remote wipe for many reasons.

Business users who want integration into corporate infrastructure.

The remaining markets are babies, the elderly and the unemployed, who are not very lucrative.

BB's current problem is that they have saturated the market with long lived devices, and are trying to sell devices to people who dont want them. They need a strategy that trades on that position instead. An old BB works fine, and there is no need to upgrade. Keep supporting the existing customers, and BB will live on, with a solid market base that will sustain them for a long time to come. Trash their customer base by abandoning the existing devices, and they really will die. Maybe they need a paid software upgrade bringing tangible improvements to the really old units?

Re:Not Surprising

[mwvdlee]

Here in the Netherlands (and as I understand it, most of Europe atleast), WhatsApp is the current chat method, and it's available on most mobile platforms, including BB. It's still proprietary, but atleast it's practically platform agnostic.

Re:Not Surprising

[hairyfeet]

Well maybe we'll get lucky and they'll be dumping playbooks on Woot! like HP did the Touchpads, gotta look on the bright side you know.

But RIM really deserves what is happening to them, another classic case of a company that tried to rest on their laurels instead of staying ahead of the game and now they are so far behind its practically impossible to get back on top. You might bet by with that in some businesses but tech is NOT one of those. We have seen it over and over again, Palm, MSFT with WinCE, if you don't try to stay ahead of the pack in mobile tech you simply get run over.

Re:Why doesn't RIM abandon their terrible OS?

[Octorian]

They actually are abandoning their legacy OS. While it may have been a great smartphone OS when originally introduced, its been pushed far beyond its design limits and is very much running out of steam.

The new OS in development, which is currently called "BlackBerry 10" (formerly called "BBX") is using the same basic modern architecture as everyone else. Under the covers, its using QNX (a POSIX-compliant realtime multitasking OS). On the surface, RIM is building a whole software stack and set of applications. They've got a new UI framework based on C++/Qt called Cascades. They're also supporting a variety of additional development options, including raw native code (for game developers), HTML5-based apps, Adobe Air, and even the "Android runtime".

They've also been holding a whole series of developer events to promote the new platform, and are seeding developer devices to help everyone get started with it. If you actually dig up and see what they've been working on, its obvious that they're dead serious about moving forward to the future.

Of course this all takes time, but they are fully committed to building out the new platform. They've even engaged the whole developer community directly, in more ways than many realize. They've been posting a ton of open source content, and have made many of their developers and program managers directly accessible to the developers out there in the community.

So people, please stop thinking they're some stodgy company still trying to push 5-year-old phones. They've changed a lot since then. It just takes time for everything to come to market, and even more time for the popular-press (who seems to have negative retorts "in the can" prior to RIM press releases being published) to notice.