RIM's Q1 unravels, operating loss on deck

Dated. Very dated.

Research in Motion said it will post a first quarter operating loss, well short of Wall Street estimates, as its business unravels due to "the on-going competitive environment."

Wall Street was expecting RIM to report earnings of 42 cents a share on revenue of $3.65 billion.

Given the shortfall, the worst fears about RIM's volumes have been realized. Analysts had been worried that RIM just wasn't getting sell-through.

In a statement, RIM CEO Thorsten Heins said:

RIM is going through a significant transformation as we move towards the BlackBerry 10 launch, and our financial performance will continue to be challenging for the next few quarters. The on-going competitive environment is impacting our business in the form of lower volumes and highly competitive pricing dynamics in the marketplace, and we expect our Q1 results to reflect this, and likely result in an operating loss for the quarter. We are continuing to be aggressive as we compete for our customers' business - both enterprise and consumer - around the world, and our teams are working hard to provide cost-competitive, feature-rich solutions to our global customer base.

On the positive side, Heins said RIM will boost its cash position from the $2.1 billion at the end of the fourth quarter. RIM may need that war chest if it is going to hold the fort ahead of its BlackBerry 10 launch in the fall.

Here are the moving parts from RIM:

• RIM said that it is seeing developer interest in BlackBerry 10, which is on track to launch in late 2012.
• Subscriber tally is 78 million. That subscriber base is driven by international markets, but there's churn in the U.S. BBM users total 59 million.
• The company is reviewing its organization to "clearly define accountabilities for all key businesses and business processes with a goal of eliminating fragmentation, duplication and inefficiencies."
• There will be layoffs throughout the fiscal year.
• RIM has retained JP Morgan and RBC to review the company's performance. That review is designed to "evaluate the relative merits and feasibility of various financial strategies, including opportunities to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives."

Shares of RIM fell 10 percent in afterhours trading.

Earlier Tuesday, Wall Street analysts began to sound the alarm bells for RIM. Wedbush analyst Scott Sutherland said in a research note:

We continue to be cautious on RIM as we believe the company’s integrated strategy is too far behind Apple’s. We are lowering our estimates, as checks indicate minimal demand for products that have become long in the tooth ahead of the BlackBerry 10 launch by the end of 2012. While we believe the currently strategy could cause RIM to go the way of Palm, we see value in the parts and thus see risks to being overly negative at current levels.

Macquarie analyst Kevin Smithen added:

It should not be a surprise to followers of RIM that the company is seeing increased volume pressure during this transition period ahead of the BB10 launch later this year. While the company has pulled financial guidance, we nevertheless want to highlight that the May and August quarters will be especially difficult as emerging market carriers begin to embrace the iPhone and low-cost Android devices. Only patient value or event-driven investors should be involved with RIM at this point.