Heins Finally Lays Out A Plan For RIM, But Maybe Too Late

Research in Motion (NASDAQ:RIMM) announced its fiscal year 2012 Q4 earnings on Thursday and as expected, the results were not much to talk about. However, the company’s new CEO, Thorstein Heins, showed an urgency during the earnings call that was lacking from the founding co-CEOs during the previous such meets. There was no putting a positive spin on things and trying to sound too optimistic in spite of poor results. Instead, he not only acknowledged that there were real problems at RIM that needed to be sorted out but also came up with a list of action items to bring about some much-needed change at the company.

While this alone should not spark thoughts of a quick turnaround at a company that has been struggling to compete with Apple’s (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) Android smartphones for quite some time now, the willingness shown by the new CEO to pay heed to some of the shareholder’s concerns suggests that he may be the right person for the tough job after all.

See our complete analysis for RIM stock here

Refocus on Enterprise

Among the many issues that Heins identified was a lost focus on one of the company’s core business strengths that had propelled RIM to dizzying heights once – the enterprise. He said that RIM will now try to reclaim lost market share in this space by refocusing itself on the development and promotion of of enterprise-specific products and services such as the Blackberry Mobile Fusion while relying on partnerships to “deliver those consumer features and content that are not central to the BlackBerry valuable position, for example, media consumption applications.” Even in the consumer segment, RIM doesn’t plan to be “all things to all people” but to go after specific target consumers that are more aligned it its enterprise strengths.

The planned shift in focus may however not show immediate results.

Belated BB10 launch putting paid to turnaround hopes

Revenues in Q4 fell to $4.2 billion, a 24% decrease from the year-ago quarter and down 19% from the third quarter. Blackberry shipments also fell to about 11.1 million, a drop of about 21% from the previous quarter. The BB7 smartphones that were launched late last year, haven’t done well in many developing countries. And the emerging markets where the entry-level smartphones have sold relatively well are subject to pricing pressures from competitors. RIM even recorded a writedown on its BB7 products, which shows that the pain is sure to last for a few more quarters at least.

Also, the Blackberry 10 smartphones, which RIM is placing great hopes on, aren’t scheduled until the latter half of this year. By that time, Apple will have likely released its next-generation iPhone, a slew of improved versions of Android smartphones will have been launched and the Lumia line of smartphones would have potentially grown in popularity. The addition of a third popular mobile ecosystem in Windows Phone could even further shut the door on the Blackberry OS.

However, Windows Phone has a lowly 2% market share currently and if they aren’t able to gain much in the next six months, RIM may be able to leverage on its comparatively huge subscriber base to gain more traction. Last quarter saw the launch of the long-awaited update to Playbook, the Playbook 2.0, which in addition to the hefty promotional discounts on offer drove Playbook sales up to 500 million. RIM is looking to build developer support for its BB10 smartphones by not giving up on its Playbooks, since both draw from the same QNX platform.

We are in the process of updating our $16.50 price estimate for RIM, in light of the recent earnings results.

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