RIM says second-quarter forecast lower than expected
Research In Motion missed analysts’ lowered revenue forecasts for its fiscal first quarter and said its outlook for the second quarter was lower than expected, as it reported its first-quarter results Thursday.
RIM also revealed that the 4G version of its PlayBook tablet has apparently been delayed. On a conference call with press and analysts, co-CEO Mike Lazaridis said PlayBooks with LTE (Long-Term Evolution), WiMax and HPSA+ (High-Speed Packet Access) would come out this fall. In the past, RIM has forecast those products for summer.
Revenue for the first quarter, which ended May 28, was US$4.9 billion, below the consensus forecast of $5.1 billion from analysts polled by Thomson Financial. The analysts’ forecasts reflected a cut in RIM’s own forecast, which was announced in late April.
Also on Thursday, the company announced a cost-cutting program that will include a headcount reduction. It expects to begin the program in the second quarter and benefit from it beginning in the third quarter.
RIM’s net income for the first quarter was $695 million, or $1.33 per share, just ahead of the analysts’ forecast of $1.32. However, the income figure was down from $769 million, or $1.38 per share, in the same quarter last year.
RIM said it sold about 500,000 BlackBerry PlayBook tablets in the quarter, following the device’s launch on April 19.
For the current quarter, ending Aug. 27, RIM expects revenue in the range of $4.2 billion to $4.8 billion and earnings per share between 75 cents and $1.05, excluding one-time charges.
RIM has been struggling to compete with Apple’s iPhone as well as devices running the Google Android OS, which in addition to being popular with consumers have begun to chip away at RIM’s stronghold in the business market.
Investors are fleeing the company. RIM’s shares, which closed Thursday at $35.33, are at about half their price just four months ago. Following its earnings news, RIM’s shares dropped a further $5.23, or almost 15 percent, in after-hours trading at the time of this report.
On April 28, RIM warned that its first-quarter smartphone shipments would likely be lower than expected and cut its earnings guidance. It cut its earnings expectations to between $1.30 and $1.37, from its earlier forecast of $1.47 to $1.55. Likewise, it said revenue would be “slightly below” the range of $5.2 billion to $5.6 billion that it had predicted earlier.
RIM said the lower expectations were due to smartphone shipments coming in on the low end of the 13.5 million to 14.5 million units it had forecast, and slower sales of high-end models compared to lower-price devices.
RIM’s PlayBook tablet, on sale since April, faces an uphill battle, even though some reviews praised the user interface, based on software acquired when RIM bought QNX, a maker of operating systems for mobile devices. However, early reviewers also cited a range of shortcomings, including the lack of a built-in email program—the main feature that drew enterprise users to the company’s iconic BlackBerry smartphone in the first place.
Delays of a touchscreen Blackberry Bold have not helped the company’s case. Meanwhile other phones based on QNX are not due out until 2012.
Native email for the PlayBook will come later this summer, RIM said. The company said the tablet is being evaluated at 1,500 enterprises.
RIM blamed the second-quarter weakness on delays in the availability of handsets with the company’s next BlackBerry operating system, called BlackBerry 7. RIM will miss the back-to-school sales period with those devices, which currently are going through certification by mobile operators, RIM executives said on a conference call after the results were released. BlackBerry 7 is a totally new software platform that ran into some initial problems getting carrier approval, but after the OS gets its first certifications, it will be easier to get additional devices with it onto the market, they said.
The BlackBerry 7 line, which will start with the BlackBerry Bold 9900, will debut late in the second quarter, RIM said. Until then, the company will be saddled with a handset lineup that is about a year old, executives said. Sales in the quarter are likely to be weighted toward the lower end of the product line, they said. Partly as a result of this, the company has also adjusted its full-year earnings forecast of $7.50 per share down to between $5.25 and $6.00 per share.
RIM said it is being hit hardest in North America and that it had stronger results in Asia and Western Europe.
Together, the development of the PlayBook, BlackBerry 7 and a future QNX “superphone” have made for a challenging time at RIM, executives said.
“We have a strong business. We have made major platform upgrades and we are almost through this transition,” Lazaridis said.
Lazaridis and Jim Balsillie, RIM’s other co-CEO, repeatedly said they were committed to the company’s dual-executive structure. RIM could not have gotten where it is today and wouldn’t succeed in the future without both of them, the executives said. Some analysts have questioned the two-CEO approach after some other companies, such as Google, have abandoned it. Lazaridis and Balsillie said they divide responsibilities between them according to their respective strengths.
“We work very closely together, and I don’t know where all these things are coming from,” Lazaridis said. “The thing you have to understand is that this is fun.”
The executives also took pains to downplay the scope of the streamlining plan. It is intended to focus the company’s resources on efforts that will matter most in the future, Lazaridis said.
“I would in no way, shape or form characterize this as a restructuring,” he said.
RIM did not disclose any details of the job cuts or other changes involved in the initiative.