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Massive delay does not sit well amid falling earnings

Waterloo, Ontario-based Research in Motion, Ltd. (TSE:RIM) tried to put on its most cheerful face reporting its fiscal Quarter 3 2012 earnings (calendar quarter 4 2011).  The numbers weren't great, but they weren't worse than expected either, living up to analysts' somewhat grim predictions.

I. RIM Can't Find an LTE Chipset to Save Its Life

The biggest story was not the earnings itself, but the earnings call in which RIM announced its BlackBerry 10 OS would be delayed half a year.  Wrote Canadian brokerage firm National Bank Financial, "RIM confirmed the BlackBerry 10 smartphones will be delayed until the latter part of calendar 2012. This could be game over for the BlackBerry franchise."

Nomura analyst Stuart Jeffrey in a research note to investors concurred that this could be the end for RIM or at least was a huge hit.  He writes, "We see a high risk that this is too late to turn around RIM's position and believe the risk of further delays is meaningful.  Even in the best case, however, it seems unlikely RIM will have large volumes of its BB10 devices on sale within 15 months."

BBX -- or should we say "BlackBerry 10" -- has been delayed half a year. [Source: RIM]

RIM's co-CEOs, Mike Lazaridis and Jim Balsillie, defend the decision to push the future of the company, well... into the future.  They said that RIM would "bounce back" from "some of the most difficult times in the history of this company".

In the conference call Mr. Lazaridis blamed the delay partially on RIM's inability to find an LTE capable chipset, a somewhat astounding excuse given the volume of LTE chipsets.  He states:

As I said on the last earnings call, we are focused on delivering a high quality, fully featured user experience when these products are launched. This means having a well-developed ecosystem of publications and services both in the hardware specifications, industrial design, and application features that will meet the expectations of consumers in the competitive US market. To achieve this goal, we need a highly integrated dual core LTE platform. The processor we selected offers industry-leading power and efficiency, and also allows us to deliver the industrial design that we believe is critical to the success in this market segment. This chipset will not be available until mid-2012, and as a result of this and certain other factors, we now expect our first BlackBerry 10 smartphones to reach markets in the latter part of calendar 2012.

For their failure the pair of co-CEOs have agreed to take pay cuts down to a $1 USD/year salary, effectively immediately.

II. "I find your lack of confidence disturbing" 

Investors' patience with the pair is waning.  Several high profile investors have put together plans advising the company to revamp its bizarre management structure.  They also suggests exploring the option of a sale.
RIM co-CEO Jim Balsillie
RIM co-CEO Jim Balsillie may be all laughs and grins, but his company's increasingly abysmal U.S. sales outlook has given investors little to crack a smile about. [Image Source: Reuters]

To recap the latest developments: It's hard not to be skeptical of RIM's future given its increasing abysmal string of misfires and embarassments in the last three months.

All this seems very ironic given Mike Lazardis's 2009 quote to Fortune -- "Sometimes we have to put the brakes on.  We've shown that we can handle annual 100% growth. I'm not sure we could handle more than that."

It's certainly done a remarkable job putting the brakes on its growth, that can be said for it.

III. The Financials

Now back to the financials themselves.

For the revenue RIM cheerfully highlights, "Revenue of $5.2 billion, up 24% from last quarter."

That $5.223B USD (GAAP adjusted) is a far cry from RIM's original outlook of $5.3B-$5.6B, which it was forced to adjust downwards just weeks ago, in an effort to soften the blow.  It's also down 4.95% from the company's reported revenue $5.495B USD in fiscal Q3 2011, a year ago.

Why compare to fiscal Q2 2012 only, when Q3 revenue has always been higher than Q2 revenue for RIM?  Such quarter-to-quarter comparison are not unusual, but companies typically put both the quarter-to-quarter and year-to-year numbers in the highlight, if they differer substantially.  

RIM reports a "GAAP net income of $265 million or $0.51 per share diluted; adjusted net income of $667 million or $1.27 per share diluted."

This is down from a net revenue of $877M USD ($1.67 USD/share) in Q3 2011, a plunge in profits of 22.7 percent.

About the only hopeful numbers for RIM come in its subscribe counts, which rose 35 percent on a year to year basis, hitting "almost 75 million", with 14.1 million BlackBerry smartphones sold in Q3 2012.  But that optimism is tempered by the fact that the global smartphone market is growing is predicted to have grown 55-57 percent in 2011. 

In other words, the comprehensive picture from the earnings report is that RIM may be growing its subscribers, but it's falling behind its competitors in growth and is seeing its profitability plunge.

BlackBerries in the trash
[Image Source: LihPao]

Perhaps most telling is the fact that RIM has only $1.5B USD in cash on hand.  That means that just one or two quarters in the red could sink the veteran firm.  For that reason, it's hard not to agree with the analysts at the NBF -- this could be "game over" for RIM.

Sources: RIM, Barrons, Reuters

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RE: Quit Dogging on RIM
By retrospooty on 12/18/2011 9:12:53 PM , Rating: 2
I have not said one lie about RIM. I am just pointing out the obvious. BB7 phones are selling like crap. No-one wants them. You on the other hand keep insisting how great they are doing in spite of profits tanking, revenue tanking, stock massively tanking to 10% its previous high 3 years ago and negative reviews all over the place. Now the fact that they are delaying their unreleased "answer" - QNX OS from mid 2012 to late 2012. Where do you think Apple and Android will be in another year? Stagnant? Hell no.

No lies there buddy, but lots of denial on your end.

But you keep on trying... I am sure you'll convince someone that RIM is worth buying a phone from.

RE: Quit Dogging on RIM
By Pirks on 12/18/2011 10:31:25 PM , Rating: 2
BB7 phones are selling like crap. No-one wants them.
Do the most recent quarter numbers like 14 million phones sold and 75 million subscribers reached mean "no one wants them"? If you seriously think so - you have to see a doctor, go check your head or something. This is ridiculous. Your lies are totally insane man...

RE: Quit Dogging on RIM
By retrospooty on 12/19/2011 7:01:41 AM , Rating: 2
In an industry that is growing insanely fast RIM's sales are declining. You keep wanting to deny that and finding facts that RIM feeds out to show they arent in total freefall, and that's fine if you believe it. I dont and neither does most of planet Earth. I am done with your lunacy and back and forth baiting.

Wanna make another bet? I know you are afraid to take my last bet that by Oct of 2012 RIM's problems would be undeniable and #'s would be down all over... Now that they delayed QNX until late 2012, that bet seems like its too easy now (for my side).

New bet - 2012 will be the year that RIM's gets passed on by a large porotion of the enterprise market. Yes, their sales will be down even in enterprise.

RE: Quit Dogging on RIM
By Pirks on 12/19/2011 11:35:09 AM , Rating: 2
RIM's sales are declining
14 million sold phones and 75 million subscribers shows the sales are GROWING actually. Stop lying.

RE: Quit Dogging on RIM
By retrospooty on 12/19/2011 11:51:00 AM , Rating: 2
REally dood, you need to just stop. Its bad enough when RIM posts "pick and choose" facts to try adn conceal whats going on, but even they arent claiming sales are not dipping (in an industry that is growing fast). You are the only one that still thinks that. Every quarter that goes by the truth becomes more evident.

RE: Quit Dogging on RIM
By Pirks on 12/19/2011 12:20:25 PM , Rating: 2
Really dood, you need to just stop nitpicking the US market share and US sales and ignoring ALL THE OTHER countries. I don't care about the US as long as RIM posts growth in the rest of the world.

RE: Quit Dogging on RIM
By retrospooty on 12/19/2011 12:45:35 PM , Rating: 2
Worldwide sales are declining. Worldwide revenue is declining. Worldwide profit is declining. How much clearer does this need to be?

n/m. I give up. You must know something that the rest of us dont. ugh.

RE: Quit Dogging on RIM
By Pirks on 12/19/2011 12:57:27 PM , Rating: 2
They still sold more phones this quarter than the last one, they got a few million new subscribers, and they are still among the top smartphone vendors (or even number one smartphone vendor, sales wise) in a few countries like UK, but of course the US market share is the only meaningful metric and the world outside the US is an empty wasteland. Sure, whatever you say sir :)))

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