Ahead of the Bell: Research in Motion
NEW YORK (AP) — Shares of Research in Motion climbed in premarket trading on Wednesday, as an analyst said that the Blackberry maker's second-quarter financial results may not be as bad as Wall Street is expecting.
Shaw Wu of Sterne, Agee & Leach says Wall Street is anticipating that Research in Motion will report a large decline in quarterly revenue and a big operating loss. The company will report its results on Thursday.
"With low expectations, we believe there is a fair chance that the company may meet or even slightly beat," Wu wrote in a client note.
Analysts polled by FactSet expect a loss of 46 cents per share on revenue of $2.43 billion.
Still, Wu says the second-quarter performance may not matter, as investors may focus more on the Canadian company's cash balance and its job-cutting plans.
In June, Research in Motion said that it would eliminate 5,000 jobs as part of a previously announced initiative to cut $1 billion in annual costs this year. The job cuts represent approximately 30 percent of RIM's workforce of about 16,500.
Wu says RIM had a cash balance of $2.25 billion in the first quarter. While it is anticipated RIM will face an operating loss in the second quarter, the analyst says that investors will be looking to see if the company was able to hold onto or even grow its cash balance by collecting on accounts receivables and working capital changes. This was something RIM was able to do in the first quarter, Wu explained.
The analyst reaffirmed a "Neutral" rating.
William Blair's Anil Doradla is concerned that RIM may not meet his quarterly revenue estimate of $2.3 billion as the company deals with intense competition and a weak product offering to consumers.
"Blackberry smartphones remain an afterthought in the consumer market," Doradla wrote.
The analyst says he doesn't believe there will be any major improvement in RIM's share price until the Blackberry 10 rolls out, and even then it remains to be seen if the new device will be embraced by consumers.
Doradla maintained a "Market Perform" rating.
Research in Motion Ltd.'s stock added 18 cents, or 2.7 percent, to $6.78 before the market open. The shares have lost more than half their value since the beginning of the year.