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Friday, June 29, 2012, 06:34 am PT (09:34 am ET)

RIM's survival until BlackBerry 10 all about cash preservation

While Research in Motion reported dismal quarterly earnings this week, the company did manage to improve its cash balance, suggesting the its demise isn't imminent — if it can survive until the launch of BlackBerry 10.

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.

RIM's improved cash position is seen by analyst Shaw Wu with Sterne Agee as a key factor in the company surviving its current struggles. If RIM isn't careful with its cash balance, he said, the company risks facing bankruptcy.

"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)."

RIM announced in May that it will slash its workforce by 40 percent in the coming months to cut costs and try to turn the company around. Once a dominant player in the smartphone market, RIM has failed to respond to handsets like Apple's iPhone and devices running Google Android.

RIM


Challenges faced by RIM, as well as Nokia and HTC, are seen by analyst Brian White with Topeka Capital Markets as opportunities for Apple to continue to gain market share. With RIM's new BlackBerry 10 operating system delayed until the first quarter of calendar 2013, White wondered on Friday if the platform 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."

If and when BlackBerry 10 does launch, analyst Charlie Wolf with Needham & Company said it needs to be "perceptibly superior" to Apple's iPhone and Google's Android platform if RIM hopes to turn its fortunes around.

"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."