RIM stated in their annual filing to US regulators that gross margins on such hardware items fell to 20 percent in the fiscal year that ended in early March from 36 percent a year earlier. Jefferies analyst, Peter Misek, has calculated in a note to clients that after assigning operating costs and including inventory charges, the hardware division likely spent 4% more than it took in.
RIM has written down the value of its product inventory in its last two quarters, and Misek expects another write-down by the end of RIM’s fiscal second quarter on September 1. “This losing money is probably the reason Thorsten initiated the strategic review,” Misek said in an interview with Reuters.
If RIM is losing money in the hardware division, should they scrap it and solely focus on software? We’ve been hearing whispers of a BlackBerry 10 licensing to Samsung, who has done very well at leveraging low-cost materials to become one of the largest handset manufacturers. Should software be the new focus at RIM? Vote and sound off in the comments.