[the_sleuth]

9:59am EDT
Some people saw this coming....

RIM considers splitting business in two -paper | Reuters

LONDON, June 24 (Reuters) - BlackBerry maker Research in Motion is considering splitting its business in two, separating its struggling handset manufacturing division from its messaging network, The Sunday Times reported.

RIM, which last month said it had hired JP Morgan and RBC Capital to look at its strategic options, could break off its handset division into a separate listed company or sell it, the British newspaper reported without citing sources.

Potential buyers would include Amazon and Facebook , it reported, adding that RIM's messaging network could also be sold, or opened up to rivals such as Apple and Google to generate income.

An alternative option would be to keep the company together but sell a stake to a larger technology firm such as Microsoft , the newspaper said.

P.S. A lot of news wires picking up on this:

http://www.bloomberg.com/news/2012-0...imes-says.html

[kbz1960]

So what would this mean for phones and tablets or would there no longer be blackberry devices?

[dbmalloy]

Much would depend on who bought the the hardware division. The nework side in theory should not affect current users... Sad if it happens as it would spell the end of RIM... For me the worst case scenario would be for Facebook to buy the hardware dvivision.......

[Ben1232]

The FB rumour shows its ugly face again.

[Pete6]

It would make more sense to split three ways.

- a handset business
- a networking company
- a patent company

The article is not directly from RIM and is full of "might", "evaluating", "could do" type comments. RIM and its advisors have been in meeting and ideas have been kicked around for just about every scenario. A split was one of them. Most of these ideas will fizzle out and die.

[anon5129477]

yeah sounds like old news. Things cant be that bad if they are selling out of phones in China and people are lining up for BB10.

[howarmat]

yeah sounds like old news. Things cant be that bad if they are selling out of phones in China and people are lining up for BB10.

They are probably going to announce the worst financial quarter in 10+ years this week, they CAN be that bad. We will wait and see what happens this week.

[SurrealCivic]

It's finally hitting the news. What I have been saying for many many months now, here on CB, N4BB and Twitter.

RIM NEEDS TO EXIT THE HARDWARE BUSINESS!

Increased labour costs, increased input prices, lower revenues and tanking margins makes RIM's hardware division not profitable.

RESEARCH IN MOTION WILL STOP MANUFACTURING HARDWARE AND FOCUS ON SOFTWARE AND SERVICES!

Research In Motion is going through a transition like never before. Having lived in Waterloo for over 15 years, I have watched RIM from pretty much infancy to global smartphone leader to where we are now (struggling to compete in this market with the likes of Apple, Google, Microsoft, etc).

Research In Motion has built some great phones throughout the years; the Curve, Bold, Pearl, Storm, Torch, Style series. Albeit some were poorly executed on (ie. Storm) and some never fit into the current market (Style). But most were winners. The BlackBerry Bold is one of the greatest QWERTY smartphones every created, to this day. The BlackBerry Torch was a great way for RIM to incorporate the QWERTY keyboard into a touchscreen slider. The Curve, probably the most successful consumer smartphone RIM created. But as the years went on, competition increased, input prices increased (commodities), costs of labour increased (worldwide); it has proved to become too expensive for RIM to manufacture hardware. I know the truth is sometimes hard to swallow, but this is a fact.

YEAR OVER YEAR, GROSS MARGINS FROM HARDWARE SALES ARE TANKING AT RIM!

Gross margins are the percent of total sales revenue that the company retains after incurring the direct costs associated with producing these goods. Therefore, the higher the percentage the more RIM makes from each dollar of sales.

On a GAAP basis, hardware gross margins of Research In Motion:

42% FY 2010
36% FY 2011
20% FY 2012

Now introduce less revenue on hardware, year over year, and you have RIM losing money on the manufacturing and selling of hardware!

Look at the competition out there, Apple (with FoxConn), Google (now with Motorola), HTC, LG, Samsung, Microsoft (with Nokia). And smartphones are becoming cheaper and cheaper each year, while input costs and labour keeps on rising.

Solution: Research In Motion needs to exit the hardware business

SOFTWARE IS THE WAY TO GO

Research In Motion purchased QNX Systems from Harman International over two years ago. They have had time to develop it into a mobile operating system that can actually compete with iOS, Android, WinPhone. And not only that, they have an OS that can be used across many different applications and industries (Automobile, Airplane to name a few).

They have been spending a lot of money on the new QNX-based BlackBerry operating system. From the design process, to attracting developers, to building the tools to develop for this OS.

It is clear now, the focus is on software. They also have their services business which has high margins and makes them approx. $1B per quarter. They also have many patents.

RIM needs to exit the hardware business, focus on software, innovate their services (a long the lines of what Balsillie had in mind) and cash in on their patents (either through patent selling, licensing or even trolling).

RIM is going to look very different a year from now, and it will be better for the company and for consumers!

Thanks for reading my comment.
Martin...

If you would like to hear more of my analysis on RIM, please follow me on Twitter (@SurrealCivic)

[Pete6]

They are probably going to announce the worse financial quarter in 10+ years this week, they CAN be that bad. We will wait and see what happens this week.

I think that you might be right but I do not think that RIM or its advisors will do anything to the structure of RIM until at least a quarter, maybe two quarters after BB10 is released.

I say this because RIM is clearly organised the way its board prefers (or they would have moved earlier) and they will wish to see how BB10 perfoms prior to making any structural moves.

As I said earlier, many ideas must have been kicked around across the boardroom table.

One thing that I would never accuse RIM's management of is not planning what happens next. Sometimes they seem to plan strangely but, they always plan.

[hpjrt]

RIM already told everyone that the quarter was going to be bad. This should come as no surprise to anyone. What's more, it shouldn't even affect the stock price much because everyone is expecting a dire quarter.

I'm quite sure that RIM is looking at every conceivable scenario at the moment and the splitting of the company has been brought up many times in the past few months. That said, there is little to suggest at this point that RIM is on the verge of acting on this speculation. Just because there is a speculative article printed in a given newspaper, on probably a slow "tech news" day, with "other wire services" picking up said speculation and repeating it does not give the original speculation any veracity.

[hpjrt]

Sorry - double post

[_StephenBB81]

IF RIM splits off hardware and software/service then hardware will die, plane and simple, it doesn't make money,

So if no one cares about the BlackBerry BRAND but just wants RIM's service for their Enterprise then this is perfect, but if you appreciate the brand, and look at the company as a living thing, not just a series of numbers, then you'd see how RIM splitting off is just an attempt at cash grab for investors, and the signal that BlackBerry is dead, but long live RIM as a service company

[polytope]

IF RIM splits off hardware and software/service then hardware will die, plane and simple, it doesn't make money,

So if no one cares about the BlackBerry BRAND but just wants RIM's service for their Enterprise then this is perfect, but if you appreciate the brand, and look at the company as a living thing, not just a series of numbers, then you'd see how RIM splitting off is just an attempt at cash grab for investors, and the signal that BlackBerry is dead, but long live RIM as a service company

Splitting the company now is the quickest way to undo all the work that the developer relations has done.

[SurrealCivic]

Splitting the company now is the quickest way to undo all the work that the developer relations has done.

This is simply not true at all.

Developer Relations focus is NOT on hardware. They have seeded an alpha device to developers for the purpose of SOFTWARE DEVELOPMENT. In the end, it doesn't matter if you are running BBOS10 on a Samsung, Nokia, HTC, etc. It is the software that RIM is focusing on through their public relations, developer relations, software architects, etc.

[amazinglygraceless]

Splitting the company now is the quickest way to undo all the work that the developer relations has done.

Help me understand this because I am honestly a bit unclear. IF, and that is a big If, RIM
were to spin-off hardware would that mean a total cessation in production of devices or would
those device simply be produced by another entity?

If it is the former, I agree. If it is the latter wouldn't developers still have something to
design for thereby continuing their work?

[kbz1960]

So if it is split off then hardware manufacturers will need to adopt bb10 or it dies? If they do adopt it then we may see a samsung, or other, phone/tablet powered by bb10?

[BB10FTW]

RIM is obviously making plans for the worst case scenarios. Plan A. Is to launch BB10 and have it be successful. That in my opinion is the only plan they should be thinking about. If it does not work as needed then onto Plan B., Plan C. and so on.... It is my opinion that the best plan is Plan A. I would love to see RIM knock the ball out of the park and atleast try to stick to Plan A. For as long as possible. Any other plan is a way of saving the company with negative effects so naturally these should be avoided until they have no choice. That is my 0.02 Pesos.

[playpen007]

At the moment, I don't think RIM will do anything drastically until after two to three quarters of releasing BB10. I also don't think RIM will separate hardware or sold out in the near future otherwise RIM will not build so many stores in Asia, Europe, Middle East and South America.

[Rickroller]

yeah sounds like old news. Things cant be that bad if they are selling out of phones in China and people are lining up for BB10.

People are lining up for BB10? I didn't even realize it was available..

[[email protected]]

1.) I think that you might be right but I do not think that RIM or its advisors will do anything to the structure of RIM until at least a quarter, maybe two quarters after BB10 is released.

2.) I say this because RIM is clearly organised the way its board prefers (or they would have moved earlier) and they will wish to see how BB10 perfoms prior to making any structural moves.

As I said earlier, many ideas must have been kicked around across the boardroom table.

3.) One thing that I would never accuse RIM's management of is not planning what happens next. Sometimes they seem to plan strangely but, they always plan.

1.) 2 Qs AFTER BB10?? You think the best strategy would be to wait until July of next year to plan as the stock nearly bottoms out? RIMM does not exist in a vacuum. It's a publicly traded company with an obligatiIon to the shareholders. If their stocks drops low enough(somewhere in the $8 per share range, it WILL be extremely difficult from it to bounce back from that. I don't see, from a reasonable point of view, how a company this large can hang it's hopes on the release of one product.

2.) Having a plan of attack does not mean you'll always be given the opportunity to execute it. You may feel RIMM has more time to "bob and weave" but, it would seem, that the markets(cell phone and financial) may disagree with you.

3.). After what happened under the previous management I don't see how you can, in good conscious, even begin to ponder such a statement. Let alone make it.

[silversun10]

well that is kind of old news, wasn't that implied when they announced involvement of RBC and JP Morgan? No new news like they have made a deal with another company...so the wait is still on for the arrival of BB10 and then how BB10 gets received in the market.
if they want to stem the bleeding now they have to give customers a deal like buy a Blackberry phone now and get a deal on BB10 when it comes out, if not the bleeding continues, a deal would be costly, but it might just be cheaper than losing your customers forever...come on RIM give your customers a bridge deal to the BB10 wakey, wakey..

[_StephenBB81]

Help me understand this because I am honestly a bit unclear. IF, and that is a big If, RIM
were to spin-off hardware would that mean a total cessation in production of devices or would
those device simply be produced by another entity?

If it is the former, I agree. If it is the latter wouldn't developers still have something to
design for thereby continuing their work?

RIM already has another entity produce many of their devices, not every device is produced internally by RIM

by RIM spinning off hardware into it's own company you are now taking the smallest Player in mobile and making him 2 smaller players, ecomony's of scale say they wont have the purchasing power to make large hardware purchases.

Apple doesn't produce it's own hardware in house, BUT they do purchase and control their materials and due to their size they get to buy a lot and that transfers into better margins,

RIM's hardware division if not bolstered by the software/service division would lack the profits to do heavy purchase, RIM and BB10 don't have the clout to force 3rd party manufacturers to take all the liability with holding hardware costs, and trying to sell BB10 devices with Strict BB10 specs,

which means 3rd party makers can use any resolution they want, they can use any additional input methods they want which makes developing apps harder and it becomes like developing for Android.

[kraski]

It's finally hitting the news. What I have been saying for many many months now, here on CB, N4BB and Twitter.

..................

SOFTWARE IS THE WAY TO GO

Research In Motion purchased QNX Systems from Harman International over two years ago. They have had time to develop it into a mobile operating system that can actually compete with iOS, Android, WinPhone. And not only that, they have an OS that can be used across many different applications and industries (Automobile, Airplane to name a few).

They have been spending a lot of money on the new QNX-based BlackBerry operating system. From the design process, to attracting developers, to building the tools to develop for this OS.

It is clear now, the focus is on software. They also have their services business which has high margins and makes them approx. $1B per quarter. They also have many patents.

RIM needs to exit the hardware business, focus on software, innovate their services (a long the lines of what Balsillie had in mind) and cash in on their patents (either through patent selling, licensing or even trolling).

RIM is going to look very different a year from now, and it will be better for the company and for consumers!

Thanks for reading my comment.
Martin...

If you would like to hear more of my analysis on RIM, please follow me on Twitter (@SurrealCivic)

I left out much of what you said. You look less rude when there's only one shouting headline.

So, if RIM is building the BB10 phones, how is it clear that the focus is just software? And consider Google and Android. The market is highly fragmented with different versions, varied hardware quality & functionality, different manufacturer customizations (even for the same OS version). It has gotten bad enough that Google came back to producing and selling their own phones. There is something to be said for controlling the entire process. Especially in the case of a company dedicated to making secure devices. Any variation in either OS or hardware is likely to open security holes.

And, no, I won't be following you on Twitter. I get enough opinions all day. And I definitely have no need for shouting main points, spoken or typed.

[kbz1960]

I left out much of what you said. You look less rude when there's only one shouting headline.

So, if RIM is building the BB10 phones, how is it clear that the focus is just software? And consider Google and Android. The market is highly fragmented with different versions, varied hardware quality & functionality, different manufacturer customizations (even for the same OS version). It has gotten bad enough that Google came back to producing and selling their own phones. There is something to be said for controlling the entire process. Especially in the case of a company dedicated to making secure devices. Any variation in either OS or hardware is likely to open security holes.

And, no, I won't be following you on Twitter. I get enough opinions all day. And I definitely have no need for shouting main points, spoken or typed.

Would manufacturers even be interested if RIM dictates what hardware etc it can put on? I can see the mess you're talking about being an old problem RIM is trying to get away from.

[khanig]

I think if RIM drops making BB phones and concentrates on software, they're done. Google's way ahead and RIM fumbled the ball big time. I have a 9800, the best phone I have. I hope BB10 is successful and I'd like one. But if they fold, I'll look at an Android. My contract's up Feb 2013, so I'll have time. Like many, I'm waiting to see what BB10 will be like which may be why they are not selling phones.
But another issue is the confusing array of BB smartphones. E.G.,I thought of getting a 9860, but BB lists a 9850. I can't find any real "huge" difference between them. Go to the CB site where you can download free wallpaper and see how many phones are listed. RIM needs ALL these models? Why? What huge tech advantage is there?
Playbook was ill conceived and very inadequate next to iPad. Why didn't RIM just work on getting out the best phone out there? Or did RIM just give up and even BB10 is all bs and just a show for the stockholders, and nice people like us are being sold a line of BS hoping we buy a RIM product, knowing they'll just dump the company anyway, and they'll make a few more bucks off dumb but well intentioned and loyal customers? I hope not, but there is more to this story RIM isn't telling its US customers.