December 15, 2011 10:20 pm

RIM co-chiefs’ salaries cut to $1 each amid crisis

Research in Motion, the Canadian manufacturer of the BlackBerry family of smartphones and the PlayBook tablet, responded to falling profits, product problems and investor disenchantment by cutting its co-chief executives’ salaries to $1 each next year and pledging a “comprehensive review”.

RIM also warned on Thursday that its next generation of smartphones running its new operating system, dubbed BlackBerry 10 – which it needs to compete more effectively against Apple’s iPhone and Google Android handsets – will not be available until “the later part of calendar 2012”, or six months later than expected.

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Jim Balsillie and Mike Lazaridis, RIM’s embattled co-chief executives, told analysts and investors in a conference call that they would “leave no stone unturned” in their attempts to overcome the company’s problems and reverse its steep share price decline. RIM’s stock has fallen almost 75 per cent this year.

The warning of further delays in the shipment of its next-generation BlackBerry 10 smartphones helped send the shares down more than 7 per cent to $14.02 in New York after-market trading.

Mike Lazaridis said new devices would run on new LTE semiconductor chips, which will not be available until mid-2010.

He said RIM would undertake extensive advertising campaign in an effort to boost sales, and acknowledged that higher marketing costs could further affect results. “We understand that our marketing efforts have not achieved the desired results,” said Mr Balsillie.

The co-chief executives, who asked for investors’ “patience and understanding” said their salaries would be cut to $1 a year while they try to put the company back on track.

Their comments came as the company reported sharply lower fiscal third-quarter earnings, mostly reflecting a previously announced $485m charge for unsold PlayBook inventory and in line with the profit warning issued earlier in the month. It also warned of lower than expected sales in the current quarter as the company struggles to compete with an ageing product portfolio.

A RIM executive said the company now expected to sell between 11m and 12m BlackBerry smartphones in current quarter, the first decline in years for that historically strong period and lower than most analysts had expected. Earnings per share in the current quarter are expected to be between 80 and 95 cents a share on revenues of between $4.6bn and $4,9bn.

RIM’s fiscal third-quarter earnings were $265m, or 51 cents a share, compared with $911m, or $1.74 per share, in the year-ago period. Adjusted earnings, excluding the PlayBook and other one-time charges, were $1.27 a share. Revenues fell by 6 per cent to $5.17bn, compared with $5.5bn in the fiscal third quarter last year.

While RIM’s sales overseas have continued to grow strongly – up 56 per cent in the latest quarter – it has been losing market share in the key US smartphone market to Apple’s iPhone and Google Android-based devices. During the latest quarter, the company, sold 14.1m BlackBerrys and 150,000 PlayBooks.

Despite disappointing PlayBook sales, RIM’s co-chief executives said repeatedly on the conference call that they remain committed to the tablet PC market which they described as still in its infancy, and expressed confidence that new PlayBook software would boost sales.

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