As it struggles with the declining popularity of the BlackBerry line of smartphones, Research in Motion said on Monday that it would begin laying off about 2,000 employees, 10.5 percent of its work force, this week.
While the company had previously announced that it planned to cut employees, the number of jobs lost was higher than some analysts expected, perhaps suggesting that the company’s situation was deteriorating more rapidly than earlier thought.
RIM also announced changes to the duties of several executives. While those new arrangements did not appear to be significant, it also said that Don Morrison, the chief operating officer, would retire. Mr. Morrison, who joined RIM in 2000, went on medical leave last month.
The growing popularity of Apple iPhones and phones running Google’s Android operating system in RIM’s crucial North American market have forced the company’s share price down by about half over the last year. Shares in RIM were down over 4 percent, to US$26.71, in midafternoon trading on Nasdaq.
While the layoffs, which were announced during a quarterly conference call earlier this year, are a response to the company’s financial situation, they will not resolve RIM’s fundamental problems. RIM’s future outlook now largely rests with a line of BlackBerry phones based around an entirely new operating system known as QNX.
Those phones, however, will not be for sale until an unspecified point next year. In the interim, RIM has introduced phones with an improved version of its decade-old operating system.
The company’s move into the tablet computer market with the BlackBerry PlayBook this spring has also proved disappointing. The device, which uses the new operating system, was introduced without many major features, including e-mail software, a puzzling omission given that BlackBerry phones were the world’s first successful wireless e-mail devices.
RIM has shipped only 500,000 PlayBooks but has not disclosed how many of them have been purchased by consumers and businesses. By comparison, Apple said last week that it sold 9.25 million iPad 2 devices during its last quarter.
In its announcement, RIM said that severance payments and other costs related to the layoffs were not included in its financial outlook for the current quarter. While the company offered no figures on Monday, Mike Abramsky, an analyst with RBC Capital Markets, estimated that the pretax cost would be US$200 million to US$250 million.
In a note to investors, Mr. Abramsky added that the extent of the cut was “more significant than previously suggested by management.”
RIM said that the layoffs in North America would take place this week. Overseas layoffs will follow later.
While the company did not disclose where the employees who will be made redundant are based, or what roles they perform, the majority of its work force is in Waterloo, Ontario, a city west of Toronto where RIM has its headquarters.
The cuts will give RIM about 17,000 employees, effectively bringing it back to levels of earlier this year. At the end of February, when its fiscal year ended, RIM reported that it had 17,500 employees.
Mr. Abramsky said that after the cuts RIM would generate revenue of US$1.2 million per employee. While that is less than Apple, it is better than Google or Nokia, he said.
RIM’s situation has led several employees to leave the company of their own accord. Brian Wallace, the former vice president of digital marketing and media, recently joined Samsung Mobile. Shortly afterward, he was followed to Samsung by Ryan Bidan, a former Microsoft Games executive who was the senior product manager for the PlayBook. (New York Times)