Research In Motion Cuts to Stop the Bleeding

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Shares of Research In Motion (Nasdaq: RIMM  ) have risen more than 1% on a down day for the market, doubtlessly thanks to yesterday's announcement that the comapny would cut 2,000 jobs from its global workforce of 19,000.

In a press release, RIM called the cuts "a prudent and necessary step" for pursuing growth, rather than a reaction to competitive pressure from Apple (Nasdaq: AAPL  ) , HTC, Samsung, and the rest of Google's (Nasdaq: GOOG  ) Android licensees. But surely the latter must be true. Just look at the numbers.

A recent study by ChangeWave Research found that only 4% of 4,163 respondents planned to purchase a new BlackBerry within the next 90 days, versus 48% who planned to purchase an iPhone, and 32% who planned on getting an Android phone.

Can you imagine what happens when the iPhone 5 reaches the market? Interest in the BlackBerry could all but disappear. Considering that doctors once named an ailment "BlackBerry Thumb," a vanishing act of that magnitude would be downright remarkable.

Last quarter, the BlackBerry maker missed its own revenue targets, and slashed guidance well below analyst estimates at the time. Most telling, revenue growth has outpaced profit growth over the past five years, as gross margin has declined from more than 54% in fiscal 2007 to 44% in the just-completed fiscal year. RIM's growth has come at a price that laid-off employees are about to bear.

Will the layoffs change the equation? You tell me. Please vote in the poll below, then leave a comment to tell us your thoughts about RIM's business. You can also add Research In Motion to your watchlist for up-to-date analysis on the stock as soon as it's published.

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Fool contributorTim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple and Google at the time of publication. Check out Tim'sportfolio holdings andFoolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insightsdelivered directly to your RSS reader.

Read/Post Comments (3) | Recommend This Article (1)

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  • Report this Comment On July 26, 2011, at 8:19 PM, gslusher wrote:

    Cuts won't help RIM turn around. In fact, they might hurt, as the remaining employees' output will probably drop because of concern for their own jobs. (The best may well decide to jump ship.) Unless there is also a significant cut in upper management, the employees may become demoralized. The CEOs should be fired, along with at least half the top management. The rest should get at least a 50% pay cut. Instead, top management will probably get bonuses.

  • Report this Comment On July 26, 2011, at 8:36 PM, Wing689 wrote:

    I agree with gslusher. Not only that, RIMM needs to embrace the face that they're OS cannot compete with the likes of Android and the Appeal/Fashion of Apple.

    Look at the bailout. Board/investors dropped CEOs like flies and swapped management like underwear until they found the perfect team capable of turning the company around.

    The Big 3 lacked more than vision. They lacked quality/management/REPUTATION.

    And yet, they were able to overcome those obstacles. They profited from the Bailout. WE profited from bailing them out.

    Same situation with RIMM. Hopefully, the CEO will wise up and realize he and his team lack the vision to embrace and implement android (OPEN SOURCE) into they're devices.

    If not, I'm sure the rest of the board of investors will make sure Canada's once most profitable company stays afloat (and regain they're portfolios) in ANY means necessary.

    I'm confident a blackberry android will be and has been in development, incorporating that with enterprise email and it will be a business users dream.

  • Report this Comment On July 27, 2011, at 10:27 AM, melegross wrote:

    Cutting employees when a company needs more R&D, marketing and support, is counter to it's needs, though, for a short time, it will make the bottom line look better.

    This is similar to cutting a budget during a recession, when more money is needed to be plowed back into the economy to get things moving.

    All this will do is to hurt the company long term. Who is being fired here? The company is raked over the coals for having too much middle management, but how many of those 2,000 being fired are middle management, and how many are the needed engineers, marketing people, support and R&D?

    It may be too late whatever is being done, but this won't help.

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