RIM reported disappointing Q2 results and weak Q3 guidance, missing consensus revenue estimates for both periods.
RIM’s Q2 earnings were impacted by a special charge related to settling patent litigation with Visto; otherwise, they were slightly above expectations.
This after many analysts expressed heightened expectations for both periods. Shares are down 12% after hours.
On the company’s earnings call, co-CEO Jim Balsillie repeatedly expressed his pleasure with RIM’s results, and referred several times to an exciting new “services” platform that the company will be rolling out. But no details.
One interesting fact: 80% of RIM’s new subscribers last quarter were non-enterprise, meaning that RIM will be increasingly going head-to-head with consumer-focused smartphone makers like Apple. (It’s more insulated in the enterprise business, where it is easily on top.)
Gross margins picked up a hair from the May period to 44.1%, but were still down significantly year-over-year, and RIM predicts they will fall to 43% next quarter.
- Q2 Revenue: $3.53 billion vs. $3.62 billion consensus, $3.7 billion (RBC)
- Q2 EPS: $0.83 ($1.03 not including one-time charge) vs. $1.00 consensus, $1.03 (RBC)
- Q2 Subscribers: 3.8 million net additions vs. 4.1 million net additions (RBC)
- Q3 Revenue: $3.73 billion vs. $3.92 billion consensus, $4.0-4.1 billion (RBC)
- Q3 EPS: $1.04 vs. $1.05 consensus, $1.06-1.08 (RBC)
- Q3 Subscribers: 4.15 million net additions vs. 4.3 million net additions (RBC)
LIVE Conference Call Notes:
5:01 Call begins. Standard disclaimers.
5:04 Jim Balsillie says he’s “pleased” with quarter’s results. Talking about new fall and winter launches, over 500 carriers and distro partners in over 170 countries.
5:04 Net subs down because high percentage of Tours were upgrades. Over 80% of net sub additions came from non-enterprise customers. This is North American carriers marketing Berry to consumers. Just over 1/3 of BB sub base outside of North America.
5:06 9.2-9.9 mm Berry shipments in Q3. Do not anticipate carriers upping inventory in near-term. Aggressively driving cost efficiencies.
5:07 Risks of new product delays could reduce ASPs, also planning to launch brand campaign in Q3 to support Berry growth among new customers, as well as existing consumer and enterprise segments.
5:08 Significant growth from Sprint (perhaps at Pre’s expense)
5:10 New Curve at Walmart under $50
5:13 More chatter about old rollouts
5:22 Talking up U2 deal. Lots of talk about what’s already happened. Not enough about what is next besides that spending money on marketing.
5:24 Now finance exec going over Q2 results from release.
5:28 Talking about outlook. 9.2-9.9mm units
5:29 ASPs coming down to prepare for new products but they won’t ship until later in the quarter
5:30 net adds 4-4.3mm, depending on launch timing
5:31 tax rate approx 29-30 pct
5:31 forex can have significant impact, etc.
5:32 Jim B: Pleased with “strong” performance and outlook.
5:33 Here’s Abramsky, who issued a glowing report this week. Have you removed effect of interim product mix issue on ASPs? Higher ASP when you get full quarters on ASP, says Jim B. Very strong demand in units, efficiency on component costs, passing some into the market. No question goal is to get more mainstream, more volume. This is a land grab, didn’t talk a lot about this on the call. Great set of value added services stuff, a lot of unveiling, some at dev conference in early Nov. Some component cost savings. Coming up with higher-end devices, more of those launched in the quarter.
5:36 Services platform being an increasingly important part of getting people to buy Berry.
5:37 Jim Suva: Outlook on unit numbers “extremely impressive” — any reason to think past this quarter that ASPs should not come back up?
5:38 Jim B giving another passionate speech about land grabs. Platform pieces coming (3x more). Rapidly expanding market, benefit of establishing lead position will accrue many years of benefit. Again with the “penny wise pound foolish.”
5:42 If smartphones going mainstream, what’s carrier reaction to lower end devices vs higher end? No question this stuff is going mainstream. But intense consolidation of CE.
5:47 Still talking about platform stuff. This really better be good, because BlackBerry apps aren’t that great compared to iPhone or potentially Android.
5:54 Another weird rant about what’s important stratgically, potentially having late products, amazing products, amazing services.
5:58 Call over. Nothing very good during Q&A. Basically more about land grab, investing for the future, and some vague services platform.
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