RIM's Q2: Ugly results on tap

RIM's fiscal second quarter will be horrible and all eyes will be on the company's cash burn and whether it can hold the fort until new devices arrive.
Written by Larry Dignan, Contributor

Research in Motion's developer powwow delivered a small dose of good news as the company touted 80 million subscribers and kept its BlackBerry 10 timelines, but the bad news is on deck: Fiscal second quarter financial results.

To say expectations for RIM's second quarter were low would be a major understatement. Wall Street is expecting RIM to report a loss of 47 cents a share on revenue of $2.5 billion for the fiscal second quarter and a miss wouldn't surprise anyone.

In fact, analysts are more focused on RIM's cash burn rate and whether it can merely hold the fort. A sampling of comments from Wall Street analysts, which were pessimistic across the board.

Related: RIM's BlackBerry 10: Why I still believe | RIM banking on BlackBerry Balance, HTML5, BYOD trend

Wedbush analyst Scott Sutherland said:

RIM is at a long-term competitive disadvantage as we remain doubtful QNX OS (BlackBerry 10) devices will ignite a turnaround. While other competitors are well along the way in developing a connected device ecosystem, RIM remains channeled mostly in smartphones and autos (QNX). Tablets have been disappointing, and the company is non-existent in the PC and interactive-TV space. More so, RIM has greatly lagged in creating a cloud-based content management platform like Apple’s iCloud. With RIM missing the key holiday season with new devices and Window 8 device announcements by Nokia, Samsung, and HTC, we continue to see Windows emerging as the potential third viable ecosystem.

Credit: CNET


TD Securities analyst Scott Penner said:

Given the consensus for losses in Q3 and Q4, we see the market focusing on cash – RIM should close Q2 with $2.2bln (flat with Q1) or $4.17/share. Although the stock is just 1.5x cash, we see tangible book value falling to $9.06 in Q4 from $11.90 in Q1, given the operating losses. We expect any BlackBerry 10 news to filter out mid-week at BlackBerry Jam Americas (runs Tuesday-Thursday) rather than with the earnings. Our question is whether there will be any buyers left after the holiday season bun fight of high-end devices?

Evercore analyst Mark McKechnie said:

Fundamentally, RIM faces an uphill battle to hold onto its 80M subscriber base and recurring revenue stream with stale products by cutting its smart phone prices below cost, while it races to bring out new BBX phones in early 2013. We note increased traction for independent Mobile Device Management (“MDM”) players such as Airwatch, Mobile Iron, Good and Zenprise to serve the BYOD market with secure smart phone and tablet management systems. RIM’s challenges are intensified by the ramp of new products from each of the three competing ecosystems including Apple’s iPhone5, Android’s Galaxy SIII, Kindle Fire and RAZR refreshes, and Windows Phone8’s Lumia 920 (NOK), Ativ S (Samsung) and 8X/8S (HTC), all of which will come before RIM’s BBX products.

Of those aforementioned comments, the most notable one may reside around RIM's upcoming product cycle. Will there be smartphone buyers left after all those new devices hit the market? Will people wait for RIM? There are reasons to believe a bit in RIM, but the reality is its cash position and mindshare need to hold on for a few more quarters.

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