RIM Layoffs Won't Right Ship, Analysts Say
Early reaction was mixed to the 2,000 layoffs announced Monday by BlackBerry maker Research In Motion, as several analysts said RIM continues to face problems from aggressive smartphone and tablet competitors such as Apple and Google.
The job cuts amount to more than 10 percent of Waterloo, Ontario-based RIM's 19,000-person workforce.
"Those 2,000 jobs, where's that going to come from? Engineers? Sales? RIM's had its work cut out to stay competitive, and now the layoffs, which are not a small number," said IDC analyst Ramon Llamas in an interview.
But analyst Jack Gold of J.Gold Associates said the 10 percent reduction, while significant, was not surprising, because RIM has grown dramatically in recent years -- the company employed just 5,000 people five years ago. "There is, no doubt, overlap," said Gold. "Layoffs should let them run a leaner ship and hopefully get products to market quicker with fewer groups and layers of management to get in the way."
RIM didn't announce changes to its much-criticized co-CEO leadership structure, in which Jim Balsillie and Mike Lazaridis share the chief executive's duties. However, the company did announce several management changes, including the retirement of Chief Operating Officer Don Morrison, whose responsibilities will be divided between RIM veterans Jim Rowan and Thorstein Heins.
Video: RIM Downsizes Staff, Readies New BlackBerry Phones
RIM's management changes will reduce the problem of "too many cooks in the kitchen," Gold added. "By streamlining, I think it's easier for a direction to be set, agreed upon and executed," he said. "Lazaridis and Balsillie have pretty well-defined roles in the organization which are complimentary. And with the reorg, it looks like they are trying to assume greater command and control of their functions."
Some RIM shareholders, however, want the co-CEO's roles to be better clarified. And in response to those demands, RIM agreed on June 30 to create a committee of independent directors to propose a governance structure for the company, although it isn't clear how long that will take.
Llamas said he will reserve judgment on the co-CEO roles, noting that the system is unusual but has also helped the company become a top seller of smartphones, especially to enterprise customers.
"RIM says, 'The co-CEO structure has worked for us in the past and we'll stick with it,'" Llamas noted. "But if things don't turn around in the next couple of quarters, not fixing that could come back and be more ammo for the critics who said, 'We told you it was a problem, so why didn't you address it back then?'"
Gold said he is less concerned about the co-CEO roles at RIM than other observers seem to be. He noted that it's not usually the case that a company's CEO causes execution problems, although the CEO is ultimately in charge of all areas of a company's performance. RIM announced in June that it had not shipped the smartphones that it had said it would, and company officials predicted lower earnings for the year.
RIM also took a long time to start shipping its PlayBook tablet -- and when it finally did so, the product didn't include native e-mail. RIM said that omission would be corrected this summer, but a native e-mail update has not yet been announced, and some bloggers, including CIO's Al Sacco, are asking what RIM is planning.
The PlayBook's problems might not be the fault of the co-CEOs, Gold argued. "Was that a CEO vision thing or a group execution thing?" he asked. "PlayBook has taken too long to get up and integrated, and it has had some quality and functional issues, but is that a lack of CEO vision or [a lack of] execution?"
With the reorganization underway, it will eventually be easier to tell how responsible RIM's co-CEOs are for the company's problems, Gold said.
Llamas said it still isn't clear how layoffs and restructurings will help address the serious competition that RIM faces from Apple's iPhone and iPad and the many Android smartphones and tablets. "The lunch that RIM has enjoyed for such a long time [as a market leader in enterprise smartphones] is being snatched, and others are trying to out-RIM RIM," Llamas said. "Apple and Android have lately stepped up their game and are going after the enterprise."
Ken Dulaney, an analyst at Gartner, said in a June report that RIM's transition to the QNX operating system on all of its devices, not just the PlayBook, will help the company's prospects -- if the transition is well executed and done quickly enough.
"While 2012 will see a maturation of the QNX touchscreen capability, security model and hardware choices, RIM will be leaving Apple and Android plenty of time to entrench themselves in key markets," Dulaney wrote. "RIM will always have the enterprise market, because it's seen as the gold standard for security and management, but the consumer market could move on."
Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed. His email address is firstname.lastname@example.org.
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