RIM’s Q1 numbers were even worse than expected, and Q2 guidance is very low — the BlackBerry maker expects revenue to be almost $1 billion below consensus this quarter.It also plans to lay people off to “streamline operations across the organisation.” Shares are down 15% in after-hours trading.
RIM’s turnaround is going slower than expected, and product delays are leading to low device shipments and revenue. Last quarter, RIM shipped 13.2 million BlackBerries, below expectations.
Meanwhile, RIM said it shipped about 500,000 PlayBook tablets last quarter, but doesn’t specify how many were sold to end users.
Here’s co-CEO Jim Balsillie’s canned quote from the release: “Fiscal 2012 has gotten off to a challenging start. The slowdown we saw in the first quarter is continuing into Q2, and delays in new product introductions into the very late part of August is leading to a lower than expected outlook in the second quarter.” said Jim Balsillie, Co-CEO at Research In Motion.
“RIM’s business is profitable and remains solid overall with growing market share in numerous markets around the world and a strong balance sheet with almost $3 billion in cash. We believe that with the new products scheduled for launch in the next few months and realigning our cost structure, RIM will see strong profit growth in the latter part of fiscal 2012.”
Q1 revenue: $4.9 billion vs. $5.15 billion consensus
Q1 EPS: $1.33 vs. $1.32 consensus
Q1 shipments: 13.2 million vs. 13.5 million units expected
Q2 revenue: $4.2-$4.8 billion vs. $5.46 billion consensus
Q2 EPS: $0.75-$1.05 vs. $1.40 consensus
Q2 shipments: None given vs. 13.5-14 million units expectation
Earnings call transcript paraphrased unless in direct quotes.
5:02 Both co-CEOs on the call today. Usually it’s just Jim Balsillie.
5:03 Standard disclaimers from head of IR.
5:05 Jim Balsillie going over numbers. As discussed in April conference call, shift in products to lower ASP, lower sellthru in US and LatAm. Shortfall in US primarily related to age of BB portfolio, delays. LatAm lower sellthrough: Change in subsidy environement in Mexico. Believe substantial growth opportunity in both places. Problems have dragged into Q2. Delays have excluded us from some Back to School programs.
5:07 Market share growth in many regions, especially Western Europe and Southeast Asia. As move through business transition, opportunity to realign costs. Some of org structure crucial to success no longer make sense. Need flexibility to hire new talent and invest in other areas. Made decision to cut costs, headcount, etc. This will make us more effective and responsive. Not making cuts to important areas for future growth. Believe will help us to grow profitably during platform transition.
5:08 RIM launched PlayBook in Q1, pleased to ship approx 500k units. While PB launch did not go as smoothly as planned, potential of product recognised. Rolled out video chat, native Facebook app. First BB tablet to feature QNX, which will also become core of future BB “superphones.” Customers continue to uncover new enterprise use cases.
5:10 Joint sales activity with other partners. BB Balance launch important for enterprise, BES upgrades. Working with Verizon to target enterprise. Working with AT&T to certify BB Bridge for their subscriber base. Mike Laz. coming to address platform shift, but now addresing management structure. Mike and I have been partners for almost 20 years, RIM has grown a lot, navigated through tough times. Few companies would have been able to survive, but we have. Neither of us could have taken the company this far alone. Neither of us can continue to do what we’re doing alone. An outsider couldn’t do it either.
5:12 Mike Laz: Thanks Jim. Believe that strong consistent leadership is critical. Etc. Commitment to RIM is stronger than ever and know what we have to do jointly and take RIM to next stage of growth and success. We understand that this transition has been hard on shareholders and employees. Truly believe that approaching final stage of transition. Can’t assure there won’t be bumps. Turbulence in marketplace. Timing problems of BB7 have been odd from outside.
5:14 Regarding recent decisions. BB was always a messaging device. 50% marketshare in many markets. Selling well in SE Asia. BB good at cost, network efficiency, etc. Already well down dev plan for next-gen handset but realised that US features and performance arms race meant we needed to upgrade chipset and use new platform. Affected timing. Always uncertainties in product development, but didn’t anticipate challenges with carrier lab entry. Should start seeing technical acceptances with shipments beginning this summer.
5:16 I would have liked nothing more than to get BB7 devices out sooner. But when you see how awesome they are, you’ll see it was worth the wait. Mike Laz drooling over new devices, PlayBook, etc. Native email, BBM, Android player coming this summer.
5:18 Why didn’t move to QNX immediately? Hard cutover between platforms would have meant abandoning strong and loyal BB dev community. Dualcore baseband processors just becoming unavailable. Also unrealistic to make tablet and BlackBerry at the same time. We have a strong business. We have made major platform upgrades, and are almost through this transition. We understand enterprise needs. We are the gold standard for security. Etc.
5:20 Now going over numbers from the release.
5:25 GUIDANCE: Expect mix of handsets heavily skew toward current products, low end of range. EPS range doesn’t include share buybacks. At low end, assumes small number of BB7 handsets introduced during the quarter.
5:26 Balsillie back. Repeating what said earlier: Confident in transition, etc. Now Q&A time.
5:27 Confidence level you have in new product launches? OS7, how far through? To what extent now worried about QNX timeline? New PlayBook delays? Laz: Can never be absolutely certain about getting through certification, but feel very confident about quality of code, what’s really exciting is based on same platform; as certify one, can leverage across board with other carriers. Part of plan to accelerate and catch up. Feeling good about prospects of certfication in labs. Products are amazing: The feel, industrial design, user experience, etc. This is really an exciting time for us. Haven’t delayed work we’re doing to build the QNX based superphone and converge platform. What’s really exciting is steady cadence of BB PlayBook updates, 4G PlayBooks coming out in the fall. Very confident with plans now that we’re through the worst of the transition. Don’t believe the delays have affected any year-end/holiday promos.
5:30 QNX guidance early 2012 unchanged at this time.
5:31 “Very pleased” with PlayBook sellthrough and seeding at corporations, but no specifics.
5:33 How will cost savings flow through in back half of the year? Haven’t worked through the details.
5:35 BB7 products designed for messaging/communications market. Smaller, lower cost. Fit into market segments where cost is premium. Expect 7 products to do very well. First QNX Superphone will offer very high degree of performance, feature set. Top of the line!
5:36 What would have done different/better w/r/t PlayBook launch? Most important thing for us is to get platform going, gestated. If you wait, it doesn’t get established. 1,500 corporations now, eval under way. Creative Suite for Adobe next week. When fast-moving market, do you wait? Or get it going when good entry point? I will tell you, when I meet with very, very senior industry analysts, they say, this is the biggest mismatch in their careers, what’s being commented and what’s under the covers. Do you wait and not get your story out? Do you walk headlong into competitiveness of media? Maybe very high bar on fit and finish. It’s a dilemma and it’s inherent. We could have waited. But would it be too late? Have a platform we can run with for a decade. Get a thoughtful CIO and get an objective assessment, look at security, it’s seriously there, and just going to gain momentum. Happy to take comment and criticism, could we have asked people to get more things done sooner? All working as hard/fast as they could. Would I do it materially different? Given facts at hand, I don’t think so. Could we have prepped media and channels with more information? Of course. [Etc…]
5:41 Restructuring. Given products hoping to launch in next few months, is doing a restructuring the right thing to do? Not going to impact ability to execute launch of new products? JBals: Would not call it a restructuring. Done 14-15 acquisitions. Streamlining exercise. Would not call this a restructuring. No reorg. I don’t have a specific number, but headcount growth, lots of triple digit growth rates all over the place. Just been so busy growing and selling product that I think this is just the right time for us to step back and make the system more efficient. Whole bunch of products coming out with NFC, future credentials.
5:46 On corp governance, thanks for comments on leadership. Seen other companies moving away from multi-headed structures. Need to get to one person making decisions. Does co-CEO structure make sense right now? I just don’t think it’s the issue. There are lots of issues and lots of things to pay attention to. We can happily talk about how we divvy duties. We can say how we coordinate that. I think I have expertise in what I do, I think Mike does in what he does. I think parts overlap and we coordinate it. If you sit there and say, let’s just change a business card, I don’t think it changes anything. I just don’t know what that addresses. We have exciting stuff ahead of us. I’ve never worked harder, never been more committed. Let’s make sure whatever changed we propose makes us more productive. Mike: Thing you need to understand is that this is fun. We’re changing the world! Transforming the way we do our work. What else do we do to get this opportunity in our lives? By working together, we have this saying, measure twice, cut once. Want to make sure the decisions we make are the right ones. [Etc… Talking about how they both have more work than they used to.] [Wow, this is very weird.]
5:55 Trying to very carefully navigate transition. Done best job we could, we now have powerful platforms evolved. Opportunities evolved. Platform will allow us to have common single platform in the future. Carrier launches, the heat I get from carriers is “hurry up and get it done.”
5:59 Last question. Carrier relationships. Pressure on carrier ARPU or certification changes? Other handset vendors are pumping through product. Is BB7 just that more complex? Thing that happened was, went to new, upgraded platform. Far more powerful performance, higher resolution screen, HD video, etc. New platform, when we got into cert, delayed us. Because we standardized on this platform, used across high end products, allowed us to create both largest cert program in history. Become experts. Able to bring all that experience and talent and process to bear. Very successful now that gotten into cert. Last minute issues with new platform.
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