Research In Motion Ltd. (RIM), having missed estimates for four straight quarters, is seeking to avoid another disappointment tomorrow as investors look for signs that its new chief’s turnaround plan is beginning to take hold.
RIM shares have tumbled 16 percent on average the day after earnings since March 2011. Analysts predict the maker of BlackBerry smartphones will say sales fell at the fastest pace in a decade, causing the Waterloo, Ontario-based company to miss its own forecast for the three months through March 3.
The quarterly results are the first for Thorsten Heins, the German-born chief executive officer who took over in January and has vowed to do something “dramatically different” to reverse the sales slump. For now, Heins has to rely on an aging product lineup to win back users lost to Apple (AAPL) Inc.’s iPhone and devices running Google Inc. (GOOG)’s Android software, before a new generation of BlackBerrys makes its debut later this year.
“The competitive landscape is getting more and more intense,” Jim Suva, a Citigroup Inc. analyst in San Francisco who recommends selling RIM stock, said in an interview on the “Bloomberg Surveillance” radio show. “We expect the outlook to be pretty bad.”
Sales probably declined 19 percent to $4.51 billion last quarter, the average of estimates compiled by Bloomberg. On Dec. 15, RIM predicted $4.6 billion to $4.9 billion. Profit per share excluding one-time items probably fell by more than half to 81 cents, the low end of RIM’s forecast of 80 cents to 95 cents.
RIM may also give a forecast for this quarter. Analysts project further declines, with sales dropping to $4.26 billion and earnings sliding to 66 cents a share.
Losing Business Users
The BlackBerry 7 models introduced last year before Heins took over have struggled in the consumer market against the latest iPhone and Android devices with larger screens and faster Web browsers. RIM’s share of the U.S. market fell to 15 percent in the three months through January from 17 percent a quarter earlier, according to ComScore Inc. (SCOR) Apple and Google increased their combined share of the market to 78 percent, ComScore said.
BlackBerry is also hurting because more companies are allowing employees to bring their iPhones to work and then add security to the devices, rather than issuing BlackBerrys to staff as they used to, Suva said.
Meanwhile rising sales of cheaper BlackBerrys in Latin America and Southeast Asia aren’t enough to offset declines in North America. RIM’s share of the global smartphone market slid to 8.2 percent in the fourth quarter from 14 percent a year earlier, while Apple’s share rose to 24 percent from 16 percent, according to research firm IDC.
Heins has said he will hire a new chief marketing officer to improve the BlackBerry’s image with consumers. He also said he held talks to license RIM’s new BlackBerry 10 software to handset and computer makers, stopping short of naming any.
Heins should focus on software licensing and leave the hardware business to those who have performed better, like Apple, said Donald Yacktman, president of Yacktman Asset Management.
“The value of an enterprise like this is its customer base,” Yacktman said, referring to RIM’s 75 million subscribers globally. “Going to an open architecture probably makes sense. Let other people do the hardware.”
For now, getting RIM’s latest hardware into customers’ hands is the priority, Heins has said. RIM said last week that software developers will get an early prototype of the BlackBerry 10 phone in May to encourage them to build consumer apps ahead of its official release in the latter part of 2012.
RIM shares have lost more than 90 percent since a 2008 high and plunged 75 percent last year alone. They fell 1.6 percent to $13.67 at the New York close.
The decline has attracted some investors back to the stock. Yacktman said his company added to its RIM holdings at the end of last year because “at this price it was worth taking a position because of potential outcomes.” His Austin, Texas- based firm is RIM’s seventh-largest investor and bought 6.2 million RIM shares in the fourth quarter because “it’s so cheap,” he said.
Meanwhile short-selling bets against RIM, which peaked at an eight-year high last month, have declined more recently. In a short sale, a trader borrows shares and sells them. If the price drops, the trader profits by buying back the stock at a lower price, repaying the loan and pocketing the difference.
The short interest on RIM’s U.S. and Canadian shares dropped to 10.3 percent of RIM’s market value on March 26 from 12.2 percent on March 20, according to Data Explorers, which compiles securities-lending data to tally short selling daily.
“It is apparent that short sellers have covered their positions in the immediate run-up to the results,” said Alex Brog, a Data Explorers analyst in London.
RIM meeting its own forecast or giving an outlook for this quarter that is “less worse than expected” could be seen as positive by investors, said Shaw Wu, an analyst at Sterne Agee & Leach Inc. who rates RIM the equivalent of a hold.
“Expectations are pretty low,” Wu said.
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