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Why Waterloo isn’t freaking out over RIM layoffs

Last summer, Research in Motion underwent the largest layoffs in its history, cutting 11% of its workforce. Unemployment in the area, however, declined.

Last summer, cracks in the armor of struggling tech giant Research in Motion took the form of solid data.

After a quarter in which sales actually rose 16% to $4.9 billion, RIM’s stock was hammered because analysts were expecting a $5.2 billion topline. RIM responded with the largest layoffs in its history.

In July, approximately half of RIM’s global workforce totaling more than 18,000 were located in Waterloo. When the company laid off 2000 of them, it was expected that the Kitchener Waterloo area, often dubbed the “Tech Triangle” would suffer. After Nortel collapsed and dragged the Ottawa tech scene, which was once referred to as “Silicon Valley North”, down with it, many in the Waterloo area feared a similar fate.

But a funny thing happened: unemployment in Canada’s Tech-Triangle area actually went down.

As the accompanying chart from Statistics Canada shows, the unemployment rate in the Kitchener-Cambridge-Waterloo area declined, from 7.4% to 6.8% between May, 2011 and May, 2012.

Now, after a much worse quarter -RIM lost $518 million, on revenue of just $2.8-billion in its Q1, which was reported Thursday -RIM said it would cut 5,000 more jobs. Surely, the Tech Triangle will now be brought to its knees, right?

Not so fast.

On the same day as the RIM layoffs, The Conference Board of Canada released a report that said the Waterloo Region will have the highest economic growth in Canada amongst medium-sized cities in 2012.

The report said that The region’s gross domestic product will grow by 3.3 per cent this year. Led by strong growth in the manufacturing sector Conference Board senior economist Robin Wiebe says the unemployment rate in the area will once again fall, if only slightly. Wiebe cites an $818-million LRT project and the presence of Toyota, which may expand this year, as examples of increased manufacturing activity.

What isn’t in the report but is impossible not to notice is that Canada’s Tech Triangle has become truly diverse. Non-profit association Communitech estimates that Waterloo Region is now home to more than 800 tech companies. A quick scan of local tech job boards reveals that many of these companies, including Blue Coat Systems, Desire2Learn, Exinda Networks, LookSmart and, somewhat curiously, RIM itself, are hiring for multiple positions.

Still, the recent RIM layoffs will be the biggest test of resiliency in the history of the area, with the Conference Board of Canada report noting that ““deteriorating conditions at RIM could have widespread negative effects.”

Last year’s emergence of Open Text as the second billion dollar company, by revenue, in Waterloo underscores a simple fact; a real Silicon Valley North could simply not be built by a single company. The Kitchener-Waterloo Tech Triangle’s critical next stage will need to show the emergence of northern versions of companies like Adobe, Cisco, Intel and Oracle to complement the Hewlett-Packard like founder status that RIM will forever enjoy if the region’s tech scene can truly blossom.

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About The Author /

Nick Waddell
Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

Comment

  1. RIM likely has prior job postings still listed. As to whether they would actually hire new staff at this time, that is highly unlikely.

  2. What does 5000 jobs equal in terms of % of the Tech Triangle workforce?  I wonder what the data will show the following month once the layoffs are taken into consideration or have they already been taken into consideration?

  3. All of RIMs hopes for any kind of future hinge on the launch of their new product, that has already been delayed multiple times. It is “very likely” that if they need to fill specific vacancies to make this launch happen, they will not hesitate to to do so. 

  4. The economy of the Kitchener-Waterloo area was doing well before RIM, and will continue to do well after RIM, on the off-chance that RIM goes completely under. All those laid-off engineers will either be snapped up by other companies, or will start their own companies.

    Unfortunately, I think that the rosy picture of the LRT project “creating jobs” is too fantastic. Government projects are money pits, not money-makers. The billions that will be poured into the giant LRT sinkhole must first be confiscated from the hard-working citizens of Waterloo Region, who will then have less money to buy BlackBerries and start businesses.

    Kitchener-Waterloo can survive the loss of RIM, and even a few more businesses of that size, but can it survive the Region bleeding the citizens dry of every last dollar to build a multi-billion dollar train that runs from downtown Kitchener to downtown Waterloo?

  5. My opinion on the whole RIM layoffs are, at the moment RIM is divided into two camps, the old RIM responsible for BB OS7 and the new RIM (mostly from acquisitions) that are responsible for BB10. RIM is simply cutting the fat of the old so it can grow the new; this is why they’re still hiring, because they need a completely different type of talent for the BB10 team that simply can’t be found in the old, slow, ugly division of RIM. In terms of the 5000 workers being layed off, (I will sound like a horrible person right now) should leave the Waterloo region and find jobs else where. Waterloo is a massive sea of startups, and the last thing it needs are people with hieratical backgrounds that think in a 1950s corporate sense. If the TechTriangle goes down, it’s not because of high unemployment the layoffs caused, but it would be because the people responsible for RIM’s failures will flood and influence the tech startups in the region.

  6. Keep lying to yourselves, if it makes you feel better, but don’t think for one second we’re believing your delusion in technicolor.

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