RIM's fourth quarter solid, but outlook cut on weak pricing, PlayBook expenses

Summary:RIM's fourth quarter earnings were in line with expectations, but the company's outlook disappointed because its smartphone average selling prices are falling and it has to ramp up spending to support the PlayBook launch.

Research in Motion's fourth quarter earnings were in line with expectations, but the company's outlook disappointed because its smartphone average selling prices are falling and it has to ramp up spending to support the PlayBook launch.

RIM delivered fourth quarter earnings of $934 million, or $1.78 a share, on revenue of $5.6 billion, up 1 percent from a year ago. Wall Street was expecting RIM to report earnings of $1.76 a share on revenue of $5.64 billion.

Marketing this PlayBook isn't cheap.

For fiscal 2011, RIM reported earnings of $3.4 billion, or $6.34 a share, on revenue of $19.9 billion, up 33 percent from a year ago. As expected, RIM was carried by international sales and the company shipped 52.3 million smartphones for the year.

The problem: RIM's average selling prices are falling. RIM projected fiscal first quarter revenue of $5.2 billion to $5.6 billion with earnings of $1.47 a share to $1.55 a share. Gross margins for the first quarter will be 41.5 percent, well below the 42.65 percent expected. Wall Street was expecting RIM to report earnings of $1.65 a share on revenue of $5.64 billion.

RIM's explanation for the first quarter miss is likely to cause more worry. RIM said:

This guidance range reflects a mix shift in handset towards lower ASP products in the first quarter and an increased level of investment in research and development and sales and marketing related to our tablet and platform initiatives. The guidance range is slightly wider than normal to reflect the risk of potential disruption in RIM's supply chain as a result of the recent earthquake in Japan.

For his part, RIM co-CEO Jim Balsillie said the investment is worth it. "We are laying a strong foundation for RIM's expanding market opportunity through focused investments and we are extremely excited about our smartphone, tablet and platform roadmaps," he said.

Also see: The next tablet battleground: The enterprise

Related:

Topics: Banking, BlackBerry, Enterprise Software

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

zdnet_core.socialButton.googleLabel Contact Disclosure

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.