Struggling BlackBerry maker shedding 2,000 jobs

The company, which described the loss of 2,000 jobs as “a prudent and necessary step” for its long-term success, said it would inform employees who will lose their jobs this week.

The job cuts, which were slightly larger than some had expected, raised questions about whether lower costs alone would go very far in addressing RIM’s lacklustre financial performance or the steady erosion of its market share.

Ed Snyder from Charter Equity Research said: “The problem is you can’t cut your way into growth or market leadership, and while I’m sure there was fat at RIM, the core problem sits squarely with management.”

RIM also announced changes among its top executives. It said one of its three chief operating officers, Don Morrison, would retire and the other two, Thorsten Heins and Jim Rowan, would take on additional responsibilities.

Mr Morrison’s departure was expected. He is now on medical leave.

BGC Partners analyst Colin Gillis said: “Cost-cutting is unlikely to change the competitive position for the company” or accelerate RIM’s revenue growth.

That said, analysts also saw lower costs as a necessary adjustment to a new reality facing RIM, once the leading force in the multi-billion dollar smartphone market.

Apple’s iPhone and devices powered by Google’s Android software have steadily eroded BlackBerry’s market share, especially in the United States, while RIM’s PlayBook, introduced in April, was a late entry to a tablet computer market that Apple’s iPad virtually invented.

RIM’s shares – halved so far this year – have been weighed down by earnings that missed the company’s own limp forecasts and a dire warning that sales will slip further because of delays in getting new smartphones to market.

Peter Misek, an analyst at Jefferies & Co, said: “I think this is obviously realigning the cost structure to a new growth, or sales, reality.”

RIM said it would explain the financial impact of the cuts when it reports second-quarter results on September 15.

Mike Abramsky, an analyst at RBC Capital Markets, called the job cuts “more significant than previously suggested.”

He estimated the pre-tax charge at between $200m and $250m.

Yesterday’s announcement was the first time RIM had put a figure on its job cut plans, which it revealed last month. The reduction will bring its workforce to 17,000.

RIM has not cut jobs in nearly a decade. In 2002 it slashed 10 percent of its staff following a dip in revenue and spiraling costs as it started selling its early BlackBerry phones via carriers.