RIM Blows it with Investors Again, Lowering Estimates

11.98
Trefis
RIMM: Research In Motion logo
RIMM
Research In Motion

Source: RIM Press Release, Trefis Estimates

Research in Motion (NASDAQ:RIMM) announced its August ending fiscal year Q2 2012 results yesterday, which were below its own expectations. The company has yet again over-promised and under-delivered. As shown in the above chart, in each of the last three quarters the company has now missed its own revenues expectations.  RIM’s situation now resembles the struggles that Nokia (NYSE:NOK) faces as both have failed to mount any credible challenge to the dominance of Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) in the smartphone and tablet markets.

RIM’s stock immediately dropped by around 20% in the after-market hours trading as a knee jerk reaction to this news. Based on the results, we have updated our price estimate significantly for RIM’s stock from $43 to $26.We had previously expected management to keep things together and tightly manage the product portfolio until the new QNX was rolled out. Now it seems that the company and management are running out of time and losing the remaining shreds of investor confidence and giving plenty of fuel to short sellers.

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Updated Estimates

For the next quarter, the company expects revenues of $5.45 billion, which is the mid-point of $5.3 and $5.6 as per the outlook given by the company. [1] However, we expect RIM to generate revenues of around $4.6 billion in the next quarter, as we don’t expect the company to undergo a major turnaround during this time period.

BlackBerry shipments below expectations

In our earlier earnings preview note titled RIM Earnings Preview: All About BlackBerry Shipments, we discussed that we expected RIM to ship 12 million BlackBerry phones in the last quarter on the premise that its recently released BlackBerry 7 based smartphones would have found some uptake. However, the company could only ship 10.6 million BlackBerry phones and blamed the miss on the lower than expected demand for older models. [1] As a result, we have revised downwards our estimate for RIM’s mobile phone market share for 2011.

PlayBook shipments even worse

The company could only ship 200,000 PlayBook tablets against our expectations of 700,000 (see RIM Unlikely to Surprise on PlayBook Sales). The company acknowledged this disappointment and mentioned that they will bring out a major software upgrade to spur up PlayBook sales. [2] We now expect RIM to sell about 1 million PlayBooks in 2011, down from our previous forecast of 2 million.

QNX the only hope now

RIM plans to migrate its BlackBerry line of smartphones to QNX operating system, which we expect to be much better than the BlackBerry OS. This transition should be completed by 2012 and could help turn the sentiment in the medium term. Assuming that RIM launches new BlackBerry “super phones” and its new phones gain traction, we believe that RIM can recover some recently lost market share.

See our complete analysis for RIM stock here

Notes:
  1. RIM FY Q2 2012 earnings press release, September 15th, 2011 [] []
  2. RIM FY Q2 2012 earnings conference call transcript, SeekingAlpha, September 15th, 2011 []