Research In Motion sells NewBay cloud services division to cut costs, boost cash

TORONTO – Research In Motion Ltd. (TSX:RIM) has sold its NewBay services subsidiary for US$55.5 million, hardly a year after the BlackBerry-maker bought the cloud services company, as the company makes changes to its operations ahead of the launch of its new smartphones early next year.

The Waterloo, Ont.-based tech company confirmed the deal made with buyer Synchronoss Technologies on Friday, saying that NewBay wasn’t a core part of its future BlackBerry product lineup.

But the price tag of the sale was about half of the near $100 million that RIM reportedly paid for NewBay in October 2011, in the final months before Jim Balsillie and Mike Lazaridis were replaced as co-chief executives.

Their successor, Thorsten Heins, has been restructuring the company since taking over earlier this year, digging deep into its operations for more ways to cut spending and shore up extra cash while it tightens the focus of its business.

The goal was to save $1 billion by the end of its financial year in February, but the company has said it already achieved those goals ahead of schedule, and would move to make further cost reductions.

Earlier this year, RIM hired two adviser firms to search for strategic options, which included the potential sale of parts of the company.

NewBay, headquartered in Ireland, provides Internet services that allow customers to store and share content like photo albums and other data, through smartphones, tablets and other devices.

“As we execute our transition and seek to save over $1 billion in operating costs, we have taken the decision to divest NewBay as it was not deemed core for the BlackBerry product roadmap in the future,” RIM said in a statement.

The sale was first announced Thursday by Synchronoss. It provides Synchronoss access to NewBay’s European customers, which include Vodafone Group, Orange and Swisscom. Its U.S. customers include AT&T, T-Mobile, Verizon and US Cellular. NewBay also works with LG Electronics and Telstra in Asia.

Synchronoss expects the acquisition will be neutral to slightly positive, on an adjusted basis, to its 2013 fiscal year results. The company said it would provide more details in February when it reports fourth-quarter financial results.

When RIM acquired NewBay it was considered a late move by the company to invest in the growing cloud services market, which has become a growing portion of revenue for major tech companies like Apple, Amazon and Google.

This year, RIM has watched its market share in North America dramatically fall to about four per cent as the BlackBerry became an afterthought in the face of Apple’s iPhone and the Samsung Galaxy S3.

And while other companies debuted new devices, RIM was forced to push the launch of its BlackBerry 10 operating system and new phones into next year, missing the crucial back-to-school and holiday shopping seasons. It is scheduled to unveil details on the new BlackBerry devices on Jan. 30.