RIM Earnings Plummet on Disappointing Sales

Research in Motion (NASDAQ:RIMM) reported a large drop in earnings on Thursday afternoon as sales of its smartphones and tablets steeply declined. RIM also issued a forecast for the current quarter that was roughly in line with analysts’ forecasts, but that wasn’t enough to stop shares from being sold off in after-hours trading. After closing the regular session down 0.6%, RIM declined another 19% in after-hours trading.

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Shipments of RIM’s BlackBerry PlayBook tablet were less than half what analysts had predicted as Apple (NASDAQ:AAPL) continued to dominate the market with its iPad. “We had cut our PlayBook numbers, and they still came in below that,” said Mike Walkley of Canaccord. The news comes as a concern to the many other companies using the same QNX operating system in their new handsets. According to Walkley, QNX is supposed to be the “platform of the future” for RIM, and its failure doesn’t bode well for other manufacturers using QNX to run their own devices.

RIM officers told analysts in a conference call that a “major” software updated was being planned for later in the year, as well as promotions intended to target both enterprise users and consumers. “We are confident that these activities will generate an increase in demand and sell-through in Q3 and into the holiday season,” said co-CEO Mike Lazaridis. The company’s third quarter will end in November.

For its second quarter, which ended August 27, RIM reported a net income of $329 million, or 63 cents a share. During the same 3-month period in 2010, the company reported a net income of $797 million, or $1.46 a share — more than twice the company’s earnings in this most recent quarter. Even after adjusting for restructuring charges, earnings for the period would have been $419 million, or 80 cents a share. Revenue declined nearly 10% to $4.17 billion, with the company citing lower demand for its older, less expensive products. Analysts had projected earnings of 87 cents a share on revenue of $4.47 billion.

RIM reported shipping roughly 10.6 billion smartphones units during the quarter, and about 200,000 units of its PlayBook tablet. Analysts had expected shipments of 11.8 million smartphones and 562,000 tablets. While the PlayBook might be dead in the water, unless the company can significantly lower its price (the 16GB model costs the same as the 16GB iPad), RIM still has hopes for several new handsets using the new BlackBerry 7 operating system, launched in the final weeks of the last quarter and expected to give sales a boost in the current quarter.

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RIM said shipments of the new devices were “near the high end” of internal expectations. RIM is projecting smartphone shipments in the third quarter will rise by 27% to 37% compared to the last quarter, with revenue projected to come in the range of $5.3 billion to $5.6 billion, with earnings of $1.20 to $1.40 a share, well above analysts projections for the period.

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