BlackBerry Maker’s Shares Plummet Late After Q2 Revenue, Q3 Outlook Disappoint
Sales Lag By Nearly $100 Mil
Smart phone company’s sales still rose 37%, but facing more competition
BY BRIAN DEAGON
INVESTOR'S BUSINESS DAILY
BlackBerry maker Research In Motion late Thursday posted sales for last quarter and gave an outlook for this quarter that missed views. Its shares tumbled.
The smart-phone company said sales for its second fiscal quarter ended Aug. 29 rose 37% to $3.53 billion, but analysts were expecting $3.62 billion.
The company did say profit minus items rose 20% to $1.03 from 86 cents in the year-earlier quarter, beating analyst views of $1. But net profit fell 4% to 83 cents from 86 cents, hurt by a $112.8 million settlement of a patent dispute with Visto.
RIM RIMM said it expects profit of $1 to $1.08 per share in the current quarter, on sales of $3.6 billion to $3.85 billion. Analysts polled by Thomson Reuters were expecting $1.05 on sales of $3.92 billion.
The Waterloo, Ontario-based company’s shares were down about 11% after hours, after issuing the results. Shares, which hit a 52-week high above 88 on Wednesday, fell 3% to 83.06 in regular trading Thursday.
Analyst views had been rising in the past week and past month. Unlike investors, analysts were forgiving, pointing to the company’s continued growth.
“The results were a disappointment relative to expectations, but the expectations may have been running too far ahead,” said Mark McKechnie, an analyst at Broadpoint AmTech.
“Some other data points, such as positive comments from component vendors like Texas Instruments TXN , caused analysts to up their guidance,” said Matthew Thornton, an analyst at Avian Securities. “Expectations may have gotten too high.”
In the past quarter, RIM began shipping the BlackBerry Tour, a midlevel device aimed mainly at consumers and carried by Verizon Wireless and Sprint Nextel S . RIM also benefited from a two-for-one promotion by Verizon for the BlackBerry Storm, a promotion that helped “to counter the impact of the (Apple AAPL ) iPhone 3GS launch at AT&T T ,” according to a note from Mike Abramsky, an analyst at RBC Capital Markets.
RIM said it shipped 8.3 million units in the quarter, but some analysts were expecting 8.5 million to 8.7 million. The company said it added 3.8 million net new subscribers in the quarter, giving it 32 million, just meeting its own forecast three months earlier of 3.8 million to 4.1 million. The 3.8 million was on par with the first quarter.
The unit shipments were up 6% from the first quarter. Earlier this month, Palm PALM — which released its bet-the-company Pre smart phone in June — reported a 134% unit-shipment gain in the second quarter from the first.
RIM’s gross profit margin of 44.1% last quarter edged its outlook, and it forecast a gross margin of 43.6% for this quarter.
RIM faces increasing competition from the likes of Apple, Palm and smart phones that run on Google’s GOOG Android operating system. But smart phones are increasingly popular overall. A June survey of 4,200 handset users by RBC Capital Markets and Change-Wave Research found that 37% owned a smart phone, up from 27% a year earlier.
Analysts expect RIM to introduce several key products in the calendar fourth quarter. They include an upgraded touch-screen Storm, a new version of its highend Bold and a new version of its entry level Curve for consumers.
James Faucette, an analyst at Pacific Crest Securities, in a research note said RIM is likely to come under further pressure to offer more low-end phones, “especially given the plethora of new (Android) smart phones from companies such as Motorola MOT and LG.”
Avian’s Thornton says the company must execute flawlessly on upcoming product introductions.