RIM hints at first quarter operating loss

Takeover talks set aside

Last year, RIM held numerous takeover discussions with potential buyers ranging from Amazon and Microsoft to private equity firms, according to sources.

But those talks never resulted in an M&A transaction under former co-chief executives Mike Lazaridis and Jim Balsillie. By the end of last year, RIM management had set aside any options for a sale and focused on trying to turn the company's fortunes around.

JPMorgan and RBC were brought in shortly after the announcement that RIM would pursue strategic alternatives in March, said one source close to the matter.

"These advisors have been tasked to help us with the strategic review we referenced on our year-end financial results conference call and to evaluate the relative merits and feasibility of various financial strategies," RIM CEO Thorsten Heins said in a statement.

RIM was not specific about the size of the likely loss in the quarter ending June 2. Before the warning, analysts had expected RIM's earnings to fall to 42 cents a share and revenue to slip to $3.64 billion, according to analyst views collated by Thomson Reuters I/B/E/S. RIM is due to release the results on June 28.

In March, RIM posted a net loss of $125 million on the back of an inventory write-down for phones launched last year. Excluding those one-time items, RIM reported an adjusted profit of $418 million.

The BlackBerry 10 handsets aren't coming out next quarter, so you know next quarter is going to most likely be worse.

Heins stressed that he planned to maintain spending and hiring for the development of the next-generation BlackBerry 10 phones and to expand its catalog of third-party applications.

A dearth of apps compared with the number available for Apple and Android-based devices has been a major drag on RIM's sales.

RIM's biggest selling point is that other smartphone makers still cannot compete with the security features on RIM's devices, something that has made the BlackBerry a crucial tool for police, government and military use.

RIM said its subscriber base grew to 78 million users, up 1 million from the previous quarter ended March 29. But growth was slower than in any recent quarter.

RIM's market share is falling by the month and the company is pinning its hopes on the BlackBerry 10 models, featuring a new operating system that RIM says will let it compete more effectively against Apple and others.

But the new devices won't be released until later this year, pointing to further difficult quarters to come.

"I don't see the tide turning," said Misek. "The problem is the BlackBerry 10 handsets aren't coming out next quarter, so you know next quarter is going to most likely be worse. Then you look at the November quarter, when we'll probably get the BB10 handsets and at the same time we'll have the iPhone 5. So that quarter is probably going to be bad.

"So we have a string of bad quarters coming and it really is tough to see how it's going to get better."