RIM Slumps on Concern Waning Sales Make It ‘Niche Player’
Research In Motion Ltd. (BB), struggling to compete in the smartphone and tablet computer markets, plunged 19 percent in Nasdaq trading after its earnings report disappointed investors for the third consecutive quarter.
The maker of the BlackBerry smartphone is losing ground in that market to Apple Inc.’s iPhone and devices that use Google Inc.’s Android software. RIM has made little progress with its PlayBook in the tablet computer market, shipping just one device for every 46 iPads that Apple sold in the latest quarter.
“RIM is on a path to becoming a niche player,” said Ted Schadler, an analyst for Forrester Research Inc. “RIM has to essentially retrench its strategy. It has to focus on what about its products make them different or better than Apple (AAPL) or Google products.”
RIM, based in Waterloo, Ontario, fell $5.61 to $23.93 at 4 p.m. New York time on the Nasdaq Stock Market, the largest drop in three months. The stock has lost 59 percent this year.
Profit for the fiscal second quarter, excluding some costs, fell to 80 cents a share, RIM said yesterday in a statement. Analysts predicted 88 cents, according to a Bloomberg survey. Revenue fell to $4.17 billion in the three months through Aug. 27, compared with the average estimate of $4.47 billion.
“RIM’s earning misses over the past few quarters has tainted investors’ confidence,” said Blaine Carroll, an analyst with Rodman & Renshaw LLC in New York. He has an “outperform” rating on the stock.
At least three analysts downgraded their ratings on the stock, including Steven Li of Raymond James Ltd. in Toronto, who dropped his recommendation to “market perform.”
The company shipped about 200,000 PlayBooks, compared with the average estimate of 490,000 units. Analysts have cut estimates for full-year PlayBook sales to an average of 2.2 million. In its last quarter Apple shipped 9.25 million iPads.
RIM shipped 10.6 million BlackBerrys last quarter. Analysts predicted 11.9 million, according to the average of 10 estimates compiled by Bloomberg.
Co-Chief Executive Officer Jim Balsillie attributed the sluggish shipments to lower-than-expected demand for older devices that have struggled to compete with the iPhone and Android devices such as the Samsung (005930) Galaxy. He also said on a conference call yesterday that RIM’s latest handsets, which run on a new BlackBerry 7 operating system, are “having an excellent reception.”
‘Challenging’ Few Months
Co-CEO Mike Lazaridis said RIM will issue a software upgrade for the PlayBook next month that will include dedicated e-mail, contacts and calendar programs, as well as software to allow the PlayBook to run Android applications. RIM drew criticism for introducing the PlayBook in April without e-mail and a shortage of apps like Netflix Inc. (NFLX) movies.
Lazaridis also said prototypes of phones built on a new QNX operating system that already underpins the PlayBook will be available “in the not-too-distant future” and that he will give more details at a conference in San Francisco next month.
“RIM is still going to have a challenging next few months until the QNX products are out and the Android app products are available,” said Alkesh Shah, an analyst at Evercore Partners. “The transition probably doesn’t finish until sometime mid to late 2012.”
RIM forecast third-quarter revenue of $5.3 billion to $5.6 billion and shipments of between 13.5 million and 14.5 million BlackBerrys. Earnings excluding charges related to job cuts will be in the range of $1.20 to $1.40.
Analysts estimated sales of $5.3 billion, 13.8 million units shipped and earnings per share of $1.38.
RIM also said that earnings for the year, excluding some costs, would be at the low end of its previous forecast of $5.25 to $6 a share.
“We don’t trust those numbers,” said Jeff Fidacaro, an analyst at Susquehanna International Group in New York.
RIM’s share of the global smartphone market dropped to 12 percent in the second quarter from 19 percent a year earlier, according to Gartner Inc. In the same period, Apple climbed to 18 percent from 14 percent, and Google (GOOG)’s Android, used in phones from Samsung Electronics Co. and Motorola Mobility Holdings Inc. (MMI), rose to 43 percent.
Net income fell 59 percent to $329 million, or 63 cents a share, from $797 million, or $1.46, a year earlier.
“Remain skeptical of guidance,” said Phillip Huang, an analyst at UBS AG in Toronto, who kept his “neutral” rating unchanged. “RIMM needs fundamental change in vision and strategy, and its transition to QNX must be near flawless to garner support from developers.”
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