Research In Motion Sinks in 1Q - Analyst Blog

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The beleaguered BlackBerry handset manufacturer Research In Motion Ltd. ( RIMM ) remains in dire strait as the company reported highly disappointing first quarter of fiscal 2013 financial results, which were no where near the Zacks Consensus Estimates. The company's future financial outlook looks grimand it continuously delaying the launch of its much-hyped BlackBerry 10 software based handsets. Consequently, in the after market trade on NASDAQ, the stock price of Research In Motion dropped $1.27 (13.91%) to $7.86, a new 52-week low end price.

GAAP net loss in the first quarter of fiscal 2013 was $518 million or a loss of 99 cents per share compared with a net income of $695 million or $1.33 per share in the year-ago quarter. In the previous quarter, Research In Motion incurred a huge one-time after-tax charge of $326 million for goodwill impairment.

First Quarter adjusted earnings per share of a loss of 37 cents were far worse than the Zacks Consensus Estimate of a loss of 5 cents. The market sentiment before the earnings release was clearly on the negative side as depicted by the Zacks Consensus earnings Estimate, which fell by an enormous 46 cents in the last 30 days. As many as 31 analysts reduced their respective estimates. Despite this, the actual figure was even below the consensus figure.

Total revenue in the first quarter of fiscal 2013 was $2,814 million, down by a whopping 42.7% year over year and also missing the Zacks Consensus Estimate of $3,081 million. Segment wise, Hardware revenue was approximately 59%, Services revenue was 36% and the remaining 5% came from Software and other sources.

In the previous quarter, Research In Motion sold 7.8 million BlackBerry devices, down 40.9% year over year and 29.7% sequentially. The company sold around 260,000 BlackBerry Playbook tablets, down 48% sequentially. For more than a year, Research In Motion is delaying the launch of its BlackBerry 10 OS based handsets. Yesterday, management announced that these products will not hit the market before the first quarter of CY 2013.

Quarterly gross margin was 28% well below the prior-year quarter gross margin of 43.9%. Quarterly operating loss was $643 million compared with an operating income of $897 million in the year-ago quarter.

During the first quarter of fiscal 2013, Research In Motion generated $711 million of cash from operation compared with $1,020 million in the prior-year quarter. Free cash flow in the reported quarter was $558 million compared with $798 million in the year-ago quarter. Cash and marketable securities, at the end of the first quarter of fiscal 2013, was $2,247 million compared with $2,111 million at the end of fiscal 2012. The balance sheet of Research In Motion remains debt free.

Restructuring

Yesterday, Research In Motion announced that the company will reduce its headcount by approximately 5,000 (about 30% of its present workforce) by the end of fiscal 2013. The headcount reduction will result into $1 billion of yearly cost savings. Earlier this month, the company hired investment banks, JPMorgan Chase & Co. and RBC Capital Markets, to evaluate various strategic options including the sale of the company as management is unsure about its future prospects.

Future Financial Outlook

Management expects to report an operating loss in the second quarter of fiscal 2013, which is likely to continue in the rest of the current fiscal. So far the company failed to provide any specific time frame when its free fall will ultimately end. For the first time since December 2003, the stock price of the company tumbled below $10 per share in June 5, 2012 and is still moving downward.

Recommendation

The nightmare of Research In Motion continues ever since Apple Inc. 's ( AAPL ) iPhone hit the market. The situation aggravated once Google Inc. ( GOOG ) launched its Android software and several handset manufacturers adopted that operating system.The stock price plummeted nearly 73% in the last year. We, therefore, maintain our long-term Neutral recommendation on Research In Motion. Currently, it holds a short-term Zacks Rank #3 (Hold) on the stock.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AAPL , GOOG , RIMM

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