BlackBerry Passport John Chen

If RIM declares bankruptcy it could damage the Canadian economy

According to reports, Research in Motion Limited corporate customers are preparing backup plans in the event that the Blackberry maker is no longer open for business. As you can imagine, things have not been going so well this year so far.  The stock is down over 72% in the past year and down 44% year to date.  Nineteen of that 44% came on June 29th when Research in Motion Limited (TSE:RIM) (NASDAQ:RIMM) reported a nasty quarterly loss, delayed its Blackberry 10 smartphone and cut jobs.

If RIM declares bankruptcy it could damage the Canadian economy

Since then, the Blackberry maker is under even more pressure to sell assets or find a buyer that would be interested in taking over RIM. “In the past three months there’s been a lot of concern that the BlackBerry platform won’t be around in the future,” said Maribel Lopez, founder of Lopez Research.  “It’s not unheard of for a large phone manufacturer to go out of business” (Bloomberg).

While Ms. Lopez’s statement is true, RIM was the dominant smartphone player before there was the iPhone, Android, Samsung Galaxy, etc.  As we have come to find out, some corporations continue to stick with RIM even though you could argue that there are much better choices on the market.

After the recent announcement that its Blackberry 10 phone will be delayed, corporations have begun developing plans to switch to one of the three choices listed above, presumably.  The head of infrastructure at Thames River Capital, Robert Cockerill, says that with the recent announcements of delays for the Blackberry 10, he believes that most of the firm’s employees will switch to Apple Inc. (NASDAQ:AAPL)’s iPhone or Google Inc (NASDAQ:GOOG)’s Andoid.  Other corporations such as GoDaddy have said that if there are any outages of service in the event of a takeover that they will switch employees to iPhone or Android “within hours”.

From a general consensus, it appears that corporations (Canada especially) are willing to stay with RIM, as long as there are no service outages or data disruptions in case the company does get taken over or sells off parts of its business. Research in Motion is one of Canada’s largest employers. It employs well over 10,000 people in the country.

The number does not seem large, but Canada’s population is only a 1/10th the size of America’s. If RIMM technically fired every employee, it would be the equivalent of America losing 100,000 jobs. That is higher than the number of new jobs created last month.

Furthermore, the effects would be felt by customers and businesses associated with RIMM. It could lead to thousands of more job cuts. RIMM’s problems could have a big effect on the Canadian economy.

Still, industry professionals have said that the likelihood of RIM turning off their servers is next to zero.

The bottom line here is that RIM still has a loyal corporate following but that could be short lived if the company does not follow through with their promise of keeping servers on and uninterrupted service if they were to be acquired.

Disclosure: No positions


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