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RIM Shares Tumble on Delayed Blackberry

By Hugo Miller
December 16, 2011 4:27 PM EST 4 Comments
A Research In Motion Ltd. (RIM) BlackBerry smartphone, right, is displayed next to the company's new PlayBook tablet computer. RIM fell as low as $13.88 in late trading after the announcement, which accompanied its third-quarter earnings results.
Photographer: David Paul Morris/Bloomberg
A Research In Motion Ltd. (RIM) BlackBerry smartphone, right, is displayed next to the company's new PlayBook tablet computer. RIM fell as low as $13.88 in late trading after the announcement, which accompanied its third-quarter earnings results.

Research In Motion Ltd. (RIM) fell to the lowest level in almost eight years after saying a new generation of BlackBerrys designed to fuel a comeback won’t be out until the “latter part” of 2012.

The smartphone maker, which originally planned to release the new devices in the first quarter of next year, also gave a sales and profit forecast that missed analysts’ estimates.

The delay adds to the challenges at RIM, which has lost market share to Apple Inc. (AAPL)’s iPhone and Android phones. The company also flubbed its entry into the tablet market, with a device that bombed with shoppers. After all that, investors may not trust the new target for the upgraded BlackBerrys, said Alkesh Shah, an analyst at Evercore Partners Inc. (EVR)

“Given the misexecution they’ve had recently, it’s hard to use that as a solid deadline,” said the New York-based analyst, who has an “equal weight” rating on RIM shares. “Let’s say it’s a year from now, my concern is that it may be too late.”

RIM shares fell 11 percent to $13.44, its lowest since January 2004. The stock has dropped 77 percent this year.

BMO Capital Markets analyst Tim Long, James Cordwell of Atlantic Equities, GMP Securities’ Michael Urlocker and Kevin Dede of Brigantine Advisors, all cut their ratings on the stock.

RIM forecast profit of 80 cents to 95 cents a share for the fiscal fourth quarter, which ends on March 3. Sales will be $4.6 billion to $4.9 billion, the Waterloo, Ontario-based company said. Analysts had projected profit of $1.08 a share and revenue of $4.85 billion, according to Bloomberg data.

BB10 Software

The PlayBook tablet computer, released in April, was the first device built on RIM’s new operating system, called BB10. The product’s weak sales, along with marketing missteps, have made investors skeptical about the broader upgrade, said Colin Gillis, an analyst at BGC Partners in New York.

“Why should we think the platform is going to get traction?” he said.

RIM drew criticism for introducing the PlayBook without e- mail, a shortcoming it said it would address over the summer. Then the company said in October that the PlayBook e-mail upgrade wouldn’t come until February.

The fourth-quarter forecast suggests consumers are already losing interest in the most recent BlackBerry 7 phones, which use the previous operating system, Shah said.

“BlackBerry 7 devices have already peaked in interest,” he said. “The concern will be: When do the BlackBerry 10 devices come out? We have no specific target date for that, and my concern is that by the time they come out, it won’t be enough.”

‘Particularly Weak’

RIM co-Chief Executive Officer Jim Balsillie said on a conference call that he’s not satisfied with the “particularly weak” performance in the U.S., which accounts for about a quarter of revenue.

“The last few quarters have been some of the most trying in the recent history of the company,” Balsillie said. The two co-CEOs will be cutting their salaries to one dollar effective immediately as they embark on a review of RIM’s product portfolio, manufacturing and research strategy, he said.

The BB10 phones were delayed because the company wanted to deliver devices with better performance and battery life, said Mike Lazaridis, the other CEO. The chipsets that will allow those capabilities won’t be available until mid-2012. “We ask for your patience and confidence,” Lazaridis said.

Jaguar Financial Corp. (JFC), a Toronto-based investment firm, reiterated its call for RIM to split into separate companies -- or seek a buyer and shake up its management. Investors holding 8 percent of RIM shares support the effort, the firm has said.

The Right Stuff?

Jaguar appealed to board members Barbara Stymiest and Roger Martin to lead efforts to split the role of chairman and CEO. Balsillie and Lazaridis also serve as co-chairmen of RIM.

Lazaridis and Balsillie didn’t discuss any plans for management or leadership changes during the conference call.

“We continue to believe that RIM has the right set of strengths and capabilities to maintain a leading role in the mobile communications industry,” they said in the earnings statement.

RIM’s U.S. market share sank to 9.2 percent in the third quarter from 24 percent a year earlier, according to research firm Canalys. HTC and Samsung (005930), which use Google Inc. (GOOG)’s Android software, both posted gains. HTC rose 24 percent from 14 percent, while Samsung climbed to 21 percent from 14 percent.

Profit Decline

RIM’s third-quarter net income plunged 71 percent to $265 million, or 51 cents a share, from $911 million, or $1.74, a year earlier. Sales fell about 6 percent to $5.17 billion.

Total BlackBerry shipments this quarter will be about 11 million to 12 million, RIM said. Analysts had projected 12.8 million units, according to Bloomberg data.

“The reason they are losing share in the U.S. is they don’t have an ecosystem,” said Sameet Kanade, a Northern Securities Inc. analyst in Toronto, who rates RIM a “speculative buy.” Apple and Google have an army of developers and hundreds of thousands of applications, helping keep users loyal. RIM, meanwhile, is focused on hardware, Kanade said.

“If their entire strategy is a hardware upgrade, where is your strategy for an ecosystem like Apple?” he said.

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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