Analysis: Will RIM's cash hold out long enough?

Fri Jun 29, 2012 2:52pm EDT
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By Alastair Sharp

TORONTO (Reuters) - For the next year or two, Research In Motion Ltd is as much about preserving cash as about selling BlackBerrys. Its very survival depends on it.

The company, which released dreadful quarterly results on Thursday and delayed the launch of the next-generation BlackBerry 10s until early 2013, is frantically cutting costs to align with a revenue stream that has dropped 43 percent over the past year.

Even so, RIM at best may have only enough cash to last two years, analysts and insiders estimate, though it currently sits on a cache of $2.2 billion and holds no debt.

"They're going to hemorrhage cash," predicted Edward Snyder from Charter Equity.

RIM needs to hold out long enough to complete the biggest technology shift in its history as it introduces the long-promised BlackBerry 10, now due out in early 2013. That assumes of course that the market warms to the devices.

"I don't know how many carriers will care at that point," said Jefferies analyst Peter Misek. "It's just a disaster."

RIM also has a $500 million credit facility that expires in September. The company is working with its banks to renew it, Chief Financial Officer Brian Bidulka said on a conference call after the results on Thursday.

Bidulka was adamant that RIM would not start burning cash in the current quarter, notwithstanding costs related to 5,000 job cuts, or about 30 percent of its workforce.   Continued...