Is RIM In Trouble?By danseitz
RIM has been struggling for years, ever since Apple introduced the iPhone and became a major player in a market the BlackBerry had had all to itself for nearly a decade. Then Google introduced the Android OS, and things got worse pretty quick.
Now, they’ve released their latest financial results, and things do not look good at all.
We’ll give you the full press release in a moment, but the key things to take away are that RIM’s revenue is off by a whopping ten percent, and that they’ve managed to sell only 200,000 Playbooks. Both are bad news, but the latter is worse because it indicates RIM’s attempt to make a corporate tablet are not working. Their Nortel acquisition might help them, but for now, they’re facing real trouble.
Here’s the full press release:
September 15, 2011
FOR IMMEDIATE RELEASE
RESEARCH IN MOTION REPORTS SECOND QUARTER FISCAL 2012
Waterloo, ON – Research In Motion Limited (RIM) (Nasdaq: RIMM; TSX: RIM), a world leader in the
mobile communications market, today reported second quarter results for the three months ended August
27, 2011 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).
Revenue in the second quarter was $4.2 billion and service revenue surpassed $1 billion for the
GAAP net income of $329 million or $0.63 per fully diluted share; adjusted net income of $419
million or $0.80 per fully diluted share
The BlackBerry subscriber base grew 40% year over year to surpass 70 million
RIM’s largest roll-out of BlackBerry smartphones was initiated with 7 new smartphones
launched with over 90 carrier and distribution partners in 30 countries during the latter part of
Approximately $780 million was invested as part of a consortium of companies that successfully
bid to acquire intellectual property assets from Nortel
BlackBerry smartphone shipments in Q3 are estimated to grow between 27-37% over Q2
Revenue for the second quarter of fiscal 2012 was $4.2 billion, down 15% from $4.9 billion in the
previous quarter and down 10% from $4.6 billion in the same quarter of last year. The revenue breakdown
for the quarter was approximately 73% for hardware, 24% for service, and 3% for software and other
revenue. During the quarter, RIM shipped approximately 10.6 million BlackBerry smartphones and
approximately 200,000 BlackBerry PlayBook tablets.
“We successfully launched a range of BlackBerry 7 smartphones around the world during the latter part of
the second quarter and we are seeing strong sell-through and customer interest for these new products.
Overall unit shipments in the quarter were slightly below our forecast due to lower than expected demand
for older models,” said Jim Balsillie, Co-CEO at Research In Motion. “We will continue to build on the
success of the BlackBerry 7 launch to drive the business as we focus our development efforts on
delivering the next generation, QNX-based mobile platform next year.”
The Company’s GAAP net income for the quarter was $329 million, or $0.63 per share diluted, compared
with GAAP net income of $695 million, or $1.33 per share diluted, in the prior quarter and net income of
$797 million, or $1.46 per share diluted, in the same quarter last year. Adjusted net income for the
second quarter was $419 million, or $0.80 per share diluted. Adjusted net income and adjusted diluted
earnings per share exclude the impact of a pre-tax one-time charge of $118 million for the Company’s cost
optimization program that was implemented in the second quarter of fiscal 2012. Details on the cost
optimization program are available in the Company’s press release dated July 25, 2011 as well as in
Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal
period ended August 27, 2011, which will be filed shortly. This charge and its related impacts on net
income and diluted EPS are summarized in the table below. Net Income Diluted EPS
As reported 329 $ 0.63 $
Cost optimization program, net of income tax
Adjusted 419 $ 0.80 $
Reconciliation of GAAP net income to adjusted net income
For the quarter ended
August 27, 2011
Note: Adjusted net income and adjusted diluted earnings per share do not have any standardized meaning prescribed
by GAAP and thus are not comparable to similarly titled measures presented by other issuers. The Company believes
that the presentation of adjusted net income and adjusted diluted earnings per share enables the Company and its
shareholders to better assess RIM’s operating results relative to its operating results in prior periods and improves the
comparability of the information presented. Investors should consider these non-GAAP financial measures in the
context of RIM’s GAAP results.
(1) During the second quarter of fiscal 2012, the Company implemented a cost optimization program to streamline
operations across the organization. The Company incurred approximately $118 million in total pre-tax charges related
to the cost optimization program. Substantially all the pre-tax charges are related to one-time employee termination
benefits and the identification and elimination of redundant facilities, with the charges included in the relevant line
items in the Company’s consolidated statement of operations. During the second quarter of fiscal 2012 pre-tax charges
of approximately $13 million were included in cost of sales, charges of approximately $19 million were included in
research and development, and charges of approximately $86 million were included in selling, marketing and
administration expenses. Additional charges for headcount related costs associated with our cost optimization program
may also be incurred in subsequent quarters.
(United States dollars, in millions except per share data)
The total of cash, cash equivalents, short-term and long-term investments was $1.4 billion as at August 27,
2011, compared to $2.9 billion at the end of the previous quarter, a decrease of $1.5 billion from the prior
quarter. Uses of cash included strategic purchases of intellectual property assets associated with RIM’s
participation in a consortium of companies that successfully bid to acquire Nortel Networks Corporation’s
patent portfolio, of which RIM’s cost is approximately $780 million, capital expenditures of
approximately $285 million, and working capital requirements.
Q3 and FY2012 Outlook
Revenue for the third quarter of fiscal 2012 ending November 26, 2011 is expected to be in the range of
$5.3-$5.6 billion. Gross margin percentage for the third quarter is expected to be approximately 37%.
BlackBerry smartphone shipments are expected to be between 13.5 million and 14.5 million units.
Adjusted earnings per share for the third quarter, excluding the impact of charges related to the
Company’s cost optimization program, is expected to be in the range of $1.20-$1.40. Adjusted diluted
earnings per share for the full year fiscal 2012, excluding the impact of charges related to the Company’s
cost optimization program, is expected to be towards the low end of the previously guided range of $5.25-
$6.00. Conference Call and Webcast
A conference call and live webcast will be held beginning at 5 pm ET, September 15, 2011, which can be
accessed by dialing 1-877-974-0445 (North America), (+1)416-644-3414 (outside North America) or
through your personal computer or BlackBerry® PlayBook™ tablet at
www.rim.com/investors/events/index.shtml. A replay of the conference call will also be available at
approximately 7 pm ET by dialing (+1)416-640-1917 and entering passcode 4466490#. A replay of the
webcast will be available on your personal computer or BlackBerry PlayBook tablet by clicking the link
above. This replay will be available until midnight ET, September 29, 2011.
About Research In Motion
Research In Motion (RIM), a global leader in wireless innovation, revolutionized the mobile industry with
the introduction of the BlackBerry® solution in 1999. Today, BlackBerry products and services are used
by millions of customers around the world to stay connected to the people and content that matter most
throughout their day. Founded in 1984 and based in Waterloo, Ontario, RIM operates offices in North
America, Europe, Asia Pacific and Latin America. RIM is listed on the NASDAQ Stock Market
(NASDAQ: RIMM) and the Toronto Stock Exchange (TSX: RIM). For more information, visit
www.rim.com or www.blackberry.com.