Research in Motion already made it clear that its fiscal third quarter isn't going to be so hot, but analysts are expecting another shoe to drop in the form of sluggish sell-through of BlackBerry devices.
The company has already warned about a $485 million charge related to excess PlayBook inventory. Now analysts are fretting about an inventory glut of BlackBerry devices that will crimp RIM's profit margins.
RIM is expected to have shipped 14.1 million smartphones in the third quarter, but Morgan Stanley analyst Ehud Gelblum estimates that only 11 million sold. Gelblum said:
We estimate just 11 million devices sold-through in FQ3, implying a 3.1 million unit channel fill, 50% higher than the normal seasonal channel fill which last year totaled about1.9M. We do not expect QNX smartphones to ship until mid-2012, creating a lull in demand for the next few quarters.
Gelblum is also expecting RIM to project smartphone shipments of 11.7 million to 12.7 million smartphones in the fourth quarter compared to current Wall Street estimates of 13.1 million.
Sterne Agee analyst Shaw Wu is also down on BlackBerry sales. He said:
Our supply chain checks indicate that while the company's new flagship BlackBerry Bold 9900 is doing well, the rest of its product line appears lackluster. In addition, we see potential for margin pressure for two reasons: (1) highly competitive pricing from HTC, Amazon, Samsung, and Apple (helped by carrier subsidies) that puts pressure on RIM to match and in many cases beat (our understanding is that RIM was blindsided by Amazon pricing its Kindle Fire aggressively at $199); and (2) network outages in early October that will likely put pressure on services and software margins as both carrier and enterprise customers receive concessions and demand discounts.