Research in Motion just delivered another ugly quarter sending the stock into a tailspin.It’s down 17% as investors take a look at these numbers:
- EPS was $0.80 versus expectations of $0.88
- Revenue was $4.2 billion versus estimates of $4.5 billion
- It shipped 10.6 million BlackBerrys versus expectations of 11.9 million units
- RIM shipped 200,000 PlayBooks versus expectations of 400,000-600,000
- RIM’s cash was wiped out: It went to $1.4 billion at the end of the quarter compared from $2.9 billion in the quarter before. It spent $780 million on the Nortel patents, and had $285 million in capital expenditures.
- Q3 revenue outlook is $5.3-$5.6 billion which is above the street’s expectation (via RBC) of $5.3 billion.
What can we say about this company that hasn’t already been said? It’s in serious trouble. It’s delivering bad quarter after bad quarter. We’ll be listening to the conference call to see how the executives explain what happened.
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LIVE: We’re on the call now. All things will be paraphrased unless in quotes:
5:08: Jim on the call, RIM sub base over 70 million. In NA, RIM BB 7 phone, meaningful increase in sell through. 35% of overall sell thru in NA. New BB7 smartphones and with more to come we think well postioned for holiday. All our major US carriers will do major marketing campaigns.
5:10: He’s just talking and talking and acting like things are going well for the company … Early results from the BB7 are “STRONG.” We anticipate acceleration of the uptake of the BB7. That’s why we expect a 20-30% growth in shipments.
5:13: Major PlayBook software upgrade planned, which we expect with invigorate sales. Mike w. more details shortly. During Q2, RIM bid on Nortel for $780 million which should significantly strengthen the company. Balance sheet remains strong with $1.4 billion. We did not do share purchases because of Nortel purchase.
5:14: BlackBerry ecosystem continued to evolve. We announced BlackBerry Music, social music playing platform. At launch more than 10 million songs available. The more friends you have the more music you can get.
5:16: More insight on our transition … successful launch of BB7 critical. It’s going well and we think we’re just seeing it. We have a lot of runway to take us to QNX based phones.
5:17: Cost-optimization program we started in July. We feel we made tremendous progress.
5:18: Mike Lazaridis takes over … Talking about BB7 uptake from carriers. Largest and most successful launch of BlackBerry phones in our history. Industry leading Java performance, the best QWERTY keyboard. Great reviews for their design.
5:20: NFC implementation already a differentiator in the enterprise.
5:22: PlayBook security is “unmatched”. We know the lack of apps is holding it back. Working with developers to change that. Major software update will be previewed in October, released afterwards.
New features include availability of new consumer apps, BlackBerry video store, and of course the ability to send video from PlayBook to TV via HDMI.
5:25: Promotional plans for the fall to drive adoption from consumers and enterprise. Confident to drive increase in demand. Development for QNX phones will be clearer in October at DevCon.
5:27: BB7 is the right choice, if we had rushed it we would not get strong sell through. We understand last few quarters have been challenged, we think we will return to growth.
5:28: Financials from IR manager now. ARPU lower than last quarter. GM 39%. Op EX 1.2 bill, which is 105 mill with cost optimization program. Inventory $1.4 billion. Current PlayBook sell through lower than we expected. Made an investment in high cost components for PlayBook. Inventory in channel we will sell through. Implementing programs to drive sell through. Expect cash balance to be lower.
5:33: Outlook for Q3 from someone else (we missed the name): $5.3-$5.6 billion. Expect GM of 37%, lower because of less services revenue and money invested to sell more PlayBooks. Total SG&A to drop by 5%. Expect cap ex to be $200 million. Diluted EPS $1.20-$1.40 for Q2.
5:35: Q&A time ….
RBC’s Mike Abramsky, why do you feel confidence in BB7 sell through less than what you expected? Big picture that share losses might not be helped by BB7 before QNX kicks in?
Jim: We plan increase channels. A lot of confidence. The reviews, the competitive performance. It’s going to do well.
Mike: BB7 accounted for 35% of sell through. Really good results for new product launch.
Abramsky: Could it taper off?
Mike: Bold 9900 is seen as a thing of beauty to behold, people loving the new BB7 experience.
5:38: Jim Suva asks, with GM lower is this a one time item?
Brian: Our Q2 Gm was really reflect of the service revenue. We’re seeing impact of handheld being bigger part of the mix.
Suva, on QNX timing? Still early?
Jim: A lot of announcements planned at DevCon, launching development phone so people can experience phones. A lot planned, dont want to give up too many secrets. Already got the development phones is a good sign.
5:40: Jeff from Barclays, follow up on GM question, they’ve come in over the last couple of quarters, how should we think of 37%, is PlayBook promo a one time thing?
Adele (?): The BB7 have a better GM profile. In terms of PlayBook, it’s going to be more than 1 quarter impact.
5:41: Morgan Keegan, things we should expect in PlayBook, can we expect native email?
Mike: We can upgrade PlayBook wirelessly. PlayBook 2.0 is something they’re looking forward to. BlackBerry bridge solved the immediate problems, it was a successful implementation, but I think the customers have been waiting for native email, calender, contacts.
5:44: Cash flow? Comfort with cash on hand?
Adele: I think we, when looking at uses of cash, we take in consideration diff opptys. We did Nortel last quarter.
5;45 Patent thoughts?
Jim: We’ve done a good job fortifying ourselves. Good job managing complex IP stuff that’s at play. Nothing to comment. Patents we’ve acquired in the past. All the literally thousands of patents we’ve filed have fortified company extremely well.
5:46: Would you expect majority on QNX or BB7 next year?
Jim: Careful with transitions … nothing right away. BlackBerry family, there is a transition oppty we’ve discussed. I suspect we’ll see strong growth in both. Diff market segments diff appeal. Two strong platforms. Strong and long term co-existence.
5:49: On GM, sounds as though, BB only may be flat to up? That true? What happened on subscriber side in the U.S.?
Adele: GM analysis is accurate. Not disclosing the U.S. subscriber numbers.
5:51: On patent buy, do you guys own them all?
Jim: All participants got access to them so they’re protective. Also oppty to monetise. Can’t say much more.
5:52: Looks like sold through 2.9 million than you shipped into the channel. How much more that you see it once again?
Brian, I think it’s an indication there’s a tremendous interest in teh products. Reality was, they cleaned out channel. Remarkable transition we’ve completed.
5:57: Can you compete with Android on price w. BB7?
Jim: These products are very successful and users love them and so I dont see anything as a step function, I see it as a blending.
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