RIM Claims It Can't Find an LTE Chipset, Delays BB10 Half a Year
December 16, 2011 11:22 AM
Massive delay does not sit well amid falling earnings
Waterloo, Ontario-based Research in Motion, Ltd. (
) 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.
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.
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
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 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:
To recap the latest developments:
a major service outage
, leaving customers without messaging.
free premium apps as apology
unveils its great OS hope
, "BBX", a new smartphone OS based on QNX.
News arrives that
RIM has been sued
for scooping the name from an American software company's trademarked and active product.
security is breached
allow jailbreaks, and raising concerns about BBX
it will miss its Q3 2012 revenue outlook
due to poor QNX (PlayBook) tablet sales.
More flaws in QNX's security are revealed,
RIM's feeble patching attempt.
RIM is barred from using the trademarked "BBX", is forced to rename operating system to "BlackBerry 10".
The NPD Group reports that RIM is fading fast in sales and only has an
8 percent market share
in the U.S., down from its peak of almost 50 percent.
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
-- "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
$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
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.
[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.
"This is about the Internet. Everything on the Internet is encrypted. This is not a BlackBerry-only issue. If they can't deal with the Internet, they should shut it off." -- RIM co-CEO Michael Lazaridis
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