Cash Preservation is Key to RIM’s Survival

Cash Preservation is Key to RIM’s Survival

Research in Motion reported horrible quarterly earning this week, but the company did manage to improve its cash balance. That may help it survive until the release of BlackBerry 10 next year.


Though RIM reported an operating loss of $308 million for its first quarter of fiscal 2013 on Thursday, the BlackBerry maker did manage to improve its cash balance from $2.1 billion last quarter to $2.2 billion this quarter. The growth in cash came from RIM collecting on its receivables, as its balance declined from $3.6 billion last quarter to $2.8 billion in the most recent three-month frame.

Shaw Wu, analyst with Sterne Agee sees the company’s improved cash position as a key factor in their survival. If RIM doesn’t tend carefully to their cash balance, bankruptcy will be in their future.

“While it is painful for us to see layoffs, it is necssary for the company’s survival,” he said. “We believe a key risk is how much cash the company uses with its 5,000 in headcount reductions by the end of (fiscal year 2013).”

Brian White with Topeka Capital Markets sees the challenges faced by RIM, Nokia, and HTC as opportunities for Apple to continue to gain market share. RIM’s new BlackBerry 10 operating system is delayed until the first quarter of 2013, and White wonders if it will ever be released.

“With the expected ramp of Apple’s iPhone 5 and the Samsung Galaxy S III in the second half of the year, we believe RIM’s delay of BlackBerry 10 may leave the company so vulnerable that the new platform may never see the light of day,” White wrote in a note to investors. “Essentially, we would not be surprised if RIM is in a different form than today by the time (the first quarter of calendar 2013) rolls around.”

Analyst Charlie Wolf with Needham & Company sounds as if he has doubts about RIM’s survival. “The existentialistic question is whether RIM indeed has a chance of reversing its downward spiral even with a superior platform,” Wolf said. “With few exceptions, once started, downward spirals have often proved very difficult to reverse.”