RIM Earnings: Before and After

Research In Motion (NASDAQ:RIMM) has pulled a couple of surprise punches for investors lately. Just a few weeks ago, headlines were that RIM was dead. Now, on September 28, shares closed up 5.04 percent after surging over 12 percent in morning trading. Here’s a snapshot of the conversation surrounding the company as it went from zero to hero in a matter of weeks.

In a September 25 report from Reuters, Gus Papageorgiou, an analyst at Scotiabank, said, “The best case scenario, given the pressure RIM is under, is a flat subscriber base with cash remaining at roughly $2.0 billion.”

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On average, analysts were expecting a loss of $0.47 per share on revenue of $2.5 billion, and shipments to fall to 6.9 million. In the shadow of Apple’s (NASDAQ:AAPL) iPhone 5 and Google’s (NASDAQ:GOOG) ever-present Android platform, few had faith.

James Faucette, an analyst at Pacific Crest, notes that retail checks show declines in BlackBerry inventory and a move to get the devices off shelves. “Even assuming the BlackBerry 10 devices roll out on time starting in 2013, we believe the clear evidence of shelf-space pressure our checks have detected does not bode well for the company in the longer term,” he said.

After the bell on September 27, RIM released its second quarter 2013 earnings report. Here are the highlights:

  • Cash, cash equivalents, short-term and long-term investments increased by $100 million to $2.3 billion.
  • Revenue was up 2 percent to $2.9 billion.
  • A net loss of $235 million — $0.45 per share diluted – including pretax restructuring costs.
  • An adjusted net loss of $142 million — $0.27 per share.
  • 7.4 million BlackBerry smartphone shipments.

Consensus seems to be “not too bad.” Shares spiked over 19 percent in after-hours trading.

Shaw Wu of Sterne Agee isn’t as impressed as the market seems to be. According to MarketWatch, he said, “We’re sitting here clapping about a 30 percent revenue drop, only because people were expecting a 40 percent revenue drop.” He adds, “They still need a plan to get back to profitability. Not being profitable – that’s not a game plan.”

RIM obviously has major hurdles in front of it. According to ComScore, Apple and Google account for 85.6 percent of the smartphone platform market. BlackBerry sales in North America have all but evaporated. The company could be forced to turn overseas for growth.

Henry Blodget at The Daily Ticker says that “the fact now that they are only growing in emerging markets is a huge warning sign,” adding that the BlackBerry is “not cutting edge, and that is the problem. They have been leapfrogged by the Android and the iPhone.”

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