Research In Motion is floundering, according to its first-quarter fiscal results. Analysts blame poor execution and increased pressure from Apple's iPhone and Google Android handsets.
Research In Motion (NASDAQ:RIMM) confirmed what many
financial analysts expected June 16 when it reported lower-than-expected
earnings for the first quarter as the company felt squeezed by Apple's (NASDAQ:AAPL)
iPhone and Google (NASDAQ:GOOG) Android smartphones.
RIM
reported earnings of $695 million on sales of $4.9 billion compared to
financial analyst estimates of $5.15 billion in sales. RIM shipped 13.2 million phones. Shares for the company
fell nearly 23 percent to $27.19 on the news in morning trading June 17.
While this shortfall wasn't a disaster in itself, RIM reneged
on earlier promises that the BlackBerry phone and tablet maker would enjoy
fiscal year 2012 earnings of $7.50 a share by nearly two dollars. The company
now expects 2012 earnings of $5.25 to $6 per share.
This current second quarter, which ends in August, will
showcase the continuing decline for RIM. The company is calling for sales of
$4.2 billion to $4.8 billion.
"The shortfall in the United States is primarily
related to the age of the BlackBerry portfolio," said RIM co-CEO Jim
Balsillie, who added that RIM would lay off employees to
make the company more efficient.
ComScore
said
Android commands 36 percent market share, with Apple's iPhone grabbing
26 percent. RIM is at 23 percent and falling, the research claimed.
RIM's handset decline is
troubling analysts most of all.
Global Equities Research analyst Trip Chowdry said RIM is
"getting killed" by the iPhone in the premium smartphone sector and
by cheap Android phones in Asia at the low-end. Android phones in China sell
for less than $50 unsubsidized, Chowdry added.
Jefferies & Co. analyst Peter Misek said that, thanks
largely to the iPhone and Android handsets, the outlook is dim for RIM's
forthcoming BlackBerry OS 7 handsets such as the Bold 9900, which may be
delayed to September. Even when it arrives, Misek said OS 7 phones are "unlikely to receive much
carrier or consumer support."
"While management is very bullish on OS 7, our
carrier checks indicate a lukewarm response," Misek wrote June 17. "These
devices get high marks as a messaging device, but as a high-end smartphones
they do not match iOS or Android."
Analysts also expect the Bold 9900 will launch too close
to the launch of a new iPhone, canceling out RIM's sales for the device, which
has a touch screen and classic BlackBerry physical QWERTY keyboard.
Misek also said pricing pressure will increase, with carrier subscriptions for RIM
phones at risk in the second half of the year. "We
cut our estimates below the new guidance, retain our underperform rating, and
lower our target to $24 from $35."
Not every analyst is down on RIM despite the fact that its BlackBerrys appear to be caught between iPhone and Android handsets.
Caris & Company's Robert Cihra said that while RIM
has lost momentum to iPhone and Android, he still thinks there's enough room
for RIM to carve out a niche within a cell phone market that comprises 1.6 billion
devices. Even that optimism came with a caveat.
"However, following a full-blown void of new
handsets year-to-date, after having already misread customer demands and
competitive landscape, it appears RIM has now sunk into eroding mismanagement,
having delayed even just its evolutionary Bold 9900 refresh multiple times and
will start implementing new cost/headcount cuts," Cihra wrote in a June 17
note.
This, he added, should have a deleterious effect on RIM's
forthcoming QNX-based super smartphones intended to give the iPhone and Android
handsets stiff competition.
Industry tech analyst Jack Gold said he sees lots or pressure on BlackBerry phones in enterprise
customers looking at iPhone or Android alternatives.
"[RIM has] to get the new devices out, and they have to hit
a home run to stem the defections," Gold told eWEEK June 17. "The new phones should still be out
end of quarter, so by end of year we'll be able to see if people like
the new Bolds and OS7."
However, its the QNX superphones RIM is expected to deliver in 2012
that is more important to the company. "That will be a huge release for
them. Perhaps even
make-or-break," Gold added.
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