Report: RIM Considers Hardware Spin-Off


Struggling smartphone maker Research In Motion is reportedly considering a move that will split the company in two, separating its handset division from its messaging division, as it begins to weigh its strategic options.

A wave of reports Sunday, starting with the London-based Sunday Times, also suggested the Waterloo, Ontario-based company might sell off its handset business completely, which is responsible for developing its BlackBerry line of smartphones.
Amazon and Facebook were reported to be "potential buyers" of the division.

RIM hasn’t officially confirmed a spin-off, but emphasized to CRN in an email that it has on-boarded financial advisors to better navigate its financial options, as RIM CEO Thorsten Heins originally said it would during its fourth-quarter earnings call in March.

[Related: RIM Discontinues 16-GB BlackBerry PlayBook]

"RIM has hired advisers to help the company examine ways to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives," an RIM spokesperson wrote. "As Thorsten said on the Company's fourth-quarter earnings call, 'We believe the best way to drive value for our stakeholders is to execute on our plan to turn the Company around.' This remains true."

Heins also said during RIM’s fourth-quarter earnings call that he will spearhead a company-wide strategic review through which "no stone will be left unturned" to identify opportunities for cost reductions.

RIM last quarter reported a net loss of $125 million, compared to $934 million in profit it reported one year earlier.

In May, Heins issued a warning to investors that a loss was also likely for its first-quarter fiscal earnings results, which will be announced June 28. He also said that RIM has brought on analysts from J.P. Morgan and RBC Capital Markets to help walk it through different financial options, as he suggested it would in March.

"These advisers 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, including opportunities to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives," Heins said in a statement, which was echoed by the RIM spokesperson.

Workforce reductions, intended to save the company $1 billion by the end of its fiscal year, have reportedly already started at RIM, with the company laying off "small batches" of 10 or so employees at a time. The layoffs are occurring in a range of departments, including quality control and operations.
Analysts at Morgan Stanley issued a research note today, according to the Wall Street Journal, suggesting RIM’s best shot at revival is to decrease its size significantly.

"We believe the only way RIM remains a viable entity is at a fraction of its current size, a transformation that erases much of its earnings power," Morgan Stanley analysts wrote. "The next 9 months likely see rapidly deteriorating fundamentals on the one hand offset by stories of potential strategic options on the other."

PUBLISHED JUNE 25, 2012