BlackBerry maker Research In Motion signed up record new subscribers during its holiday quarter, but one carrier’s changes to its inventory caused RIM to miss Q4 sales expectations.
On RIM’s earnings call, co-CEO Jim Balsillie said that one of its carrier partners changed its inventory policy during the quarter, resulting in lower than expected device shipments and revenues.
That’s not that big of a deal, long-term. What matters long-term is that RIM continues to sign up subscribers, and can start to improve its hardware and software offerings to compete better against Apple’s iPhone and Google’s Android.
The worry: It seems like RIM is shifting toward the mid- to low-end of the smartphone market, which could be troublesome.
We’ll see more about that later this year. Guidance for the May quarter is above consensus — subscriber growth is expected to be especially strong — and RIM execs teased new products that it will roll out this year.
RIM reported $4.08 billion in Q4 revenue, up 18% year-over-year, missing the Street’s $4.31 billion expectations. EPS came in at $1.27, a hair below the Street’s $1.28 consensus. Either way, RIM did NOT blow out its numbers like it used to.
BlackBerry Q4 subscriber growth was better than expected — a record 4.9 million subscribers added during Q4 — but RIM’s device shipments were well below expectations. Margins were stronger than expected.
Shares dropped 4% in after-hours trading.
- Revenue: $4.08 billion vs. $4.31 billion consensus (24.5% y/y growth), $4.5 billion high estimate
- EPS: $1.27 vs. $1.28 consensus, $1.32 high estimate
- Subscriber adds: 4.9 million vs. 4.6 million (RBC estimate)
- Shipments: 10.5 million vs. 11.2 million (RBC est.)
- Gross margins: 45.7% vs. 43.5% (RBC est.)
- Q1 guidance: $4.35 billion revenue midpoint; $1.345 EPS midpoint; 5.05 million sub adds midpoint; vs. expected above $4.3 million revenue consensus, $1.22 EPS consensus, vs. 4.4 million to 4.8 million expected sub. adds, 11.25 million to 11.75 million expected shipments.
LIVE Conference call notes (refresh for the latest). Paraphrasing, unless in direct quotes.
4:57 Waiting for call to begin.
5:01 Call begins.
5:02 Standard intro, disclaimers.
5:04 Balsillie happy to report record result. BB sub base grew 65% this year to 41 million, with 17 million net new subs added during the year. Pleased that BB was #1 smartphone brand in the U.S., and were 5 of top 10 smartphones in North America.
5:05 Units shipped slightly below forecast because of a customer change in inventory policy, which led to reduction in inventory. Coupled with success of lower ASP Curve 8520 caused revenue to drop. EPS were in the forecast range. Expect gross margins in low 40s due to product mix and new product cycles.
5:08 Lots of products expected to drive strong growth in shipments late in the year. Expect strong earnings growth. Expect globalization trend to continue. Growing appeal of BlackBerry among new demos. Percentage of non-enterprise subs continues to grow at a rapid pace. Sprint had strong quarter with Tour and Curve.
5:12 More highlights from carriers around the world…
5:18 Talking about IBM Lotus stuff! And earlier, a tool that links Exchange and BB.
5:21 Viigo acquisition will work closely with BB platform folks. RIM brand getting stronger according to UK tracker.
5:22 Strong growth in market share in North America and globally. Sustained growth in fiscal 2011 because of new products, etc.
5:22 Now going over results from earnings release.
5:26 Now going over outlook for Q1. 11.2-11.8mm units. Rev 4.25-4.45 billion. ASPs expected lower than Q1 305-310. Product mix is primary factor. Targeting GMs 44.5%. As we look out beyond, expect GMs in low 40s throughout fiscal year. Due to expected shifts in products and new product introduction cycles. 4.9-5.2 mm subs expected.
5:29 Now it’s Q&A time
5:30 Mix is heavily skewed toward Curve form factor; how long can keep growth going without significant contribution from various touchscreens. 10 mm new devices activated excluding phone-only sales.
5:30 There’s just a great product roadmap for the year. Adele talked about ASPs mix related, new products are going to change mix. IF you saw what we were doing with the product, roadmap, channel, international, I just can’t talk about what we haven’t announced, I just love our roadmap for the year. You’re just going to have to stay tuned.
5:33 If you guys saw the stuff we had, and platform, you’d love it. Don’t misconstrue inventory adjustment things.
5:34 Occasionally you get a tweak from a carrier here and there. I love our roadmap, I love our engagement and plan, we guided some growth in Q1, and Adele has signaled some things for the rest of the year. Don’t misconstrue something that shouldn’t be misconstrued.
5:44 Sector we’re in is describing rapidly. Social and prepaid and Curve models has really just nailed entry markets and International markets. More and more capabilities over time. Phenomenal place to start. Great use and frankly for entry levels, respecting network scarcity. We’ve got great B2B plans, higher ASP are strong media strategies. Major carrier alignment. Can RIM handle iPhone entry to Verizon? Not going to speculate what other companies are going to do. We have 530 carriers in over 100 countries. Our whole thing is very strong alignment with strategic, being a platform for their customers, highly profitable customers, rich interface with ecosystem. And it’s working. Ecosystem is working. That’s why we’re seeing growth we’re representing. I see every one of those elements only strengthening going forward. Competitive hand on relative basis is strengthening. If you saw what was going on with devices, platforms, we’re strengthening.
5:47 I think a lot of people are asking, seems Net Adds went down in North America… what’s going on? North America is fine. North America is doing really, really well. I don’t know kinda how you’re thinking that. North America is fine in nets basis and quite frankly strengthening, I think you’re misconstruing it. Net Adds were up in North America last quarter. Expect pricing much stronger in big Brazilian market.
5:56 Light load on infrastructure!
5:56 Q&A over. Call over. Over and out.
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