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RIMM Beats Estimate, Outlook Grim - Analyst Blog

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BlackBerry-maker Research In Motion, Ltd ., ( RIMM ) declared its third quarter 2012 financial results yesterday, after the closing bell. Despite beating the Zacks Consensus Estimate, the company provided grim outlook for the upcoming quarters. Following the earnings release, share price of RIMM fell $1.15 (7.60%) to $13.98 in the after market trade in NYSE.

Total revenue in the reported quarter was $5,169 million, down 5.9% year over year. Adjusted revenue of $5,223 million in the quarter, remained below the Zacks Consensus Estimate of $5,284 million. During the reported quarter, Research In Motion shipped around 14.1 million BlackBerry smartphones and around 150,000 BlackBerry Playbook tablets.

Net income in the reported quarter was $265 million or 51 cents per share compared with $911 million or $1.74 per share in the prior-year quarter. Adjusted EPS (excluding PlayBook inventory provision, cost optimization program expense and service interruption cost) of $1.27 was ahead of the Zacks Consensus Estimate of $1.23.

Gross margin in the reported quarter was 27.3% compared with 43.6% in the year-ago quarter and 38.7% in the previous quarter. Segment wise, Device shipment accounted for 79% of revenues, Services contributed 19% and the remaining 2% came from Software and Other revenue.

During the third quarter of fiscal 2012, Research In Motion generated approximately $1862 million in cash from operations compared with $3,004 million in the prior-year quarter. At the end of the reported quarter, Research In Motion had $1,307 million in cash and investments and no outstanding debt on its balance sheet compared with approximately $2,121 million in cash and investments and no outstanding debt at the end of fiscal 2011.

Future Financial Outlook

Management expects fourth quarter 2012 revenue between $4.6 billion and $4.9 billion, which is below the Zacks Consensus Estimate of $5 billion. Gross margin is estimated to be 38%. Quarterly EPS is expected in the range of 80 cents-95 cents, which is much lower than the Zacks Consensus Estimate of $1.18. According to management, BlackBerry smartphone shipments are expected to grow within the range of 11 million-12 million.

Our Take

Woes continue for the company as it is consistently losing market share due to stiff competition from Apple Inc. 's ( AAPL ) tablets and newly released iPhone 4S that has already garnered huge demand during this holiday season. Concurrently, Research In Motion has reduced its fourth quarter financial outlook, hence raising concern for the investors.

Recently, Research In Motion also slashed its tablet prices in order to clear its inventory backlog. Additionally, the company has delayed the launch of its new QNX-based smartphones, which was expected to be launched in the first quarter of 2012. These combined factors will further put pressure on company's margins and EPS going forward.

However, strong subscriber growth and increased smartphone sales arising from the launch of new BlackBerry 7 smartphones will act as catalysts for growth in the near term.

We, thus, maintain our long-term Neutral recommendation for Research In Motion Ltd. Currently, Research In Motion Ltd has a Zacks #3 Rank, implying a short-term Hold rating.

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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 Nasdaq, Inc.


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

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