RIM 4Q Earnings Preview: Can BlackBerry Maker Reboot Success?

By : Subscribe to David's | March 28, 2012 4:21 PM IST

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Research In Motion Ltd. (Nasdaq: RIMM) will announce fiscal fourth-quarter results after North American markets close Thursday, the BlackBerry maker's first earnings report since Thorsten Heins was installed as CEO on Jan. 22.

Uppermost in investors' minds will be whether the Canadian company can rebound even modestly from recently anemic performance due to the BlackBerry's eroding share of the smartphone market.

Analysts expect RIM to report net profit of 83 cents a share on revenue of about $4.6 billion, according to Dow Jones MarketWatch. That compares with the company's own guidance, delivered in December, for the quarter ended Feb. 29: RIM predicted earnings of between 80 cents and 95 cents a share, on $4.6 billion to $4.9 billion in revenue.

RIM also said it expected to ship between 11 million and 12 million BlackBerry units in the fourth quarter; analysts' forecasts are at the low end of that range.

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A year ago, RIM had a fourth-quarter profit of $934 million, or $1.78 a share. Revenue shot up 36 percent to $5.6 billion -- in stark contrast to the direction expected this quarter.

Times have changed. Blame Apple Inc.'s (Nasdaq: AAPL) phenomenal success with the iPhone family for blasting away at the BlackBerry's slice of the smartphone market. Ditto for the iPad: Former longtime co-chief executives Jim Balsillie and Mike Laziridis introduced RIM's Playbook tablet, only to see it flop. The two, who had run the Waterloo, Ontario, company since its founding by Laziridis in 1984, remain major shareholders as well as members of RIM's board. Laziris also serves as vice chairman.

BlackBerry sales declines have also been propelled by the rising popularity of mobile devices using Google Inc.'s (Nasdaq: GOOG) Android operating system.

Only one of 50 analysts surveyed by MarketWatch has a "buy" rating on RIM's shares; 14 rate the stock a sell while the remaining 35 have neutral calls. The shares have lost 75 percent of their value over the past 52 weeks, although only 3.7 percent so far in calendar 2012.

On Wednesday, the Nasdaq-traded stock closed down 22 cents at $13.67 a share. RIM's market capitalization is $7.16 billion, compared with $20 billion a year ago.

New CEO Light On Turnaround-Plan Details 

Last August, activist investor Victor Alboini, CEO of Toronto-based Jaguar Financial Corp., started buying RIM shares, followed later by Leon Cooperman, founder of New York's Omega Advisers. Neither man has filed with U.S. regulators to indicate a stake above 5 percent.

RIM's signature BlackBerry network was hit in October by an embarrassing three-day outage of email and other services. The problem was attributed to software and led to further delays in the launch of an operating system for QNX handsets and the BlackBerry 10. RIM has said its next-generation BlackBerry will be rolled out in late 2012, with hopes of reversing months of declining market share and waning interest from developers of smartphone apps.  

By late January, Heins, RIM's 54-year-old operating chief, who had come from German conglomerate Siemens AG (NYSE: SI), was elevated to CEO. Barbara Stymiest, a retired Royal Bank of Canada vice president who has served as a RIM director since 2007, was elected nonexecutive chairman. Alboini said he was dubious but willing to give the new boss, Heins, a year to prove his mettle.

Heins advised caution and said he would use RIM's technology, customer base and $1.5 billion in cash and investments to marshal a turnaround. He didn't give many hints about how he would do so, except to mention respect for his predecessors' "process discipline" and willingness to monetize some of the company's patents.

Some analysts, such as Peter Misek of Jefferies & Co., see little hope on the BlackBerry horizon. For the full fiscal year, he estimates handset sales will have plunged another 20 percent, to only 42 million of a total 1.8 billion sold worldwide.

Last week, technology market researcher International Data Corp. reported that RIM was outsold by Apple even in Canada in 2011. The California-based company sold 2.85 million iPhones, compared with only 2.08 million BlackBerrys on RIM's home ice.

Citigroup Inc. analyst Jim Suva wrote that RIM's financial performance "is going to get worse" than expected. He expects earnings of only 83 cents on sales of 11.4 million BlackBerrys and 241,000 Playbook tablets.

The tech sector is studded with fallen angels that mounted successful turnarounds, including International Business Machines Corp. (NYSE: IBM), Dell Inc. (Nasdaq: DELL) and Texas Instruments Inc. (NYSE: TXN) as well as Apple.

With luck, Heins may be able to make his mark on the company that brought texting and smartphone use to business users.

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