BlackBerry Maker RIM is Toast, At Least For Now

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Mar 25 2011
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RIM is toast, if the stock price’s performance in after-hours trades is any indication after the company announced its earnings. Well, the earnings was great with the fourth-fiscal quarter surged 32% on strong sales of the company’s BlackBerry smartphones. What was disastrous was the forecast for the current period that is below Wall Street’s expectation. Research In Motion Limited’s (Nasdaq: RIMM, stock) stock plunged RM6.72 a share or 10.48% (*ouch*) after the lower guidance.

For the quarter ended Feb. 26, RIM reported:

  • net income: $934 million, up 32%
  • earnings per share: $1.78 vs expectation of $1.75
  • revenue: $5.56 billion vs expectation of $5.65 billion
  • smartphones shipped: 14.9 million vs expectation of 14.7 million

Despite great numbers, the BlackBerry maker however warned its earnings would slip as it spends heavily on the launch of its PlayBook tablet. RIM projected earnings of between $1.47 and $1.55 per share in the current quarter – well below the $1.65 analysts had forecast. RIM also expects revenue of between $5.2 billion to $5.6 billion compared to analysts’ expectation of $5.67 billion.

BlackBerry RIM Toast

Gross margin for the May quarter is expected to be about 41.5% compared to 44.1% for the recently ended period. In short, while the February quarter was fine, the May quarter guidance was awfully weak hence the punishment. To make matter worse, RIM gave a wider guidance range due to potential disruption to its supply chain in the aftermath of the Japan earthquake this month.

RIM did not give any specific sales forecast for the PlayBook gadget which is scheduled to be ship next month but analysts are already looking on average 315,000 units sales for the quarter. However RIM co-CEO Jim Balsillie said that his enterprise customers are very excited about the PlayBook, claiming that corporate clients have approached him about wanting “several tens of thousands” of PlayBooks.

Coming late into the market, PlayBook needs to get very lucky to give some tilts to the market share from the already second generation and same-price iPad2. So let’s see if PlayBook can play the same tablet game profitably together with Apple, Motorola, Samsung and the others.

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