The numbers behind RIM's impending collapse

RIM is in dire straits. This week it announced it would suffer an operating loss and suspended its shares on the Nasdaq. Here's what you need to know before market open.

Toward the end of market trading yesterday, Research In Motion temporarily froze its shares to deliver the inevitable news: the BlackBerry maker is in deep financial trouble and is no longer generating profit.

This means RIM is no longer a functioning business. It's a dead weight around Canada's neck.

The terrifying thing is that RIM saw this coming and did nothing. It only shouted, "Train!" as the company was being hit by he train.

RIM hedged its bets on BlackBerry 10, its forthcoming operating system, along with its new range of smartphones. Whether or not RIM can survive until then remains unclear. Many think not. Some believe the company can keep going under the wing of a new owner.

Short term, however, RIM has to cut spending and because it doesn't have any spare assets, it's going to have to cut its staff.

RIM has already fallen in pre-market trading. Here are the numbers you need to know before the markets open.

Before the Nasdaq wakes up and begins trading again, RIM stands at $11.23 a share. It lost more than 10 percent of its value as it dipped as low as $10.57 a share after the news broke yesterday. The company recovered most of the losses before market close, though.

The value of RIM shares have been down more than 75 percent over the past 12 months and continues to slowly drop. It was trading as high as $70 a share in May last year but its share price dramatically fell in the face of aggressively competing rival smartphones.

RIM went from a company worth $78 billion in mid-2008 to one that barely scraps the bottom of the barrel at $5.2 billion today. It has lost more than 90 percent of its value. In comparison, Apple wouldn't even fit on the chart below. It's so high up; it would be around where the "summary" box is on this article.

But this is where the company made headlines yesterday after it royally stuffed up.

You'll see from RIM's profit margin that it dipped below the 0 percent mark toward the end of January. By the time February came, RIM was no longer generating profit and was losing money. It now stands at around 3 percent below the profit line.

RIM said its pegged its cash total at $2.1 billion at the end of Q4 2011, ending in March. By now it's likely less than that but still around the $2 billion mark. The BlackBerry maker can take sustained losses for a while but investors would rather see a company sale than losing any vast chunk of its strong cash position.

RIM ran out of fuel, and ran on fumes for mere days before it totaled below the 2 percent profit loss mark. The company is in utter free-fall and there seems to be nothing stopping RIM slipping further into trouble.

For now, RIM can only cut, cut, and cut some more. It has to drastically reduce its expenditure and operating costs. In the absence of new income as its old income stream dries up, RIM is literally looking around for things to get rid of to shed weight to keep the boat afloat.

Without dipping into its cash savings, all it can do is send people home.

The company said last week it would lay-off around 2,000 employees, or as many as 6,000. It has around 16,500 employees worldwide. A slashing of 6,000 staff represents more than a third of the company. Though anyone connected to BlackBerry 10 -- the company's lifeline -- is thought to be safe. It leaves actually very few left on the software and hardware side of things. Its data network needs maintaining for its remaining 78 million BlackBerry customers.

RIM's total subscriber base includes 8 million in the U.K. and 7 million in Indonesia. Surprisingly, the number has continued to rise even in the face of a global outage that spread over four days in October 2011.

RIM has two areas: its smartphone sector and its data infrastructure. A BlackBerry is useless without the data infrastructure, meaning if RIM goes bust and fails to sell its data networks, more than 78 million people will suddenly lose service. RIM may have nothing left to lose, but its customers certainly do.

But because RIM has avoided laying off its staff wherever possible, the company hasn't been shrinking. The last major layoff was 2,000 staff in July 2011.

ZDNet associate editor Andrew Nusca nailed it in a line: "You're looking at one-and-a-half years of denial in that chart." Had RIM knew how deep in trouble it was, it would have started shedding excess baggage a long time ago.

If you haven't already noticed, every single graph you've seen so far is on a downward trend. Despite the next two showing an upward trend, do not be deceived. The two remaining graphs continue to cause headaches for RIM.

RIM's third-quarter earnings are out June 28. We'll brace ourselves for a fireworks show in the coming hours.

Get your popcorn at the ready.

Image credits: Yahoo Finance, YCharts, Guardian/ZDNet.

This story originally appeared as "RIM's impending collapse: By the numbers" on ZDNet's Between the Lines.

 

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