Bloomberg News

RIM Tumbles as Sales Shortfall Signals Apple Extending Lead

December 07, 2011

(Updates with closing share price in fifth paragraph.)

Dec. 2 (Bloomberg) -- Research In Motion Ltd. plunged the most in 11 weeks after saying revenue missed its forecast last quarter amid accelerating market-share losses for BlackBerry smartphones and PlayBook tablets to Apple Inc.

Third-quarter revenue was “slightly lower” than the $5.3 billion to $5.6 billion the company had projected and earnings were “at the low to mid point” of its forecast, according to an unscheduled statement from Waterloo, Ontario-based RIM today. RIM said it doesn’t expect to meet its full-year profit target.

The shortfall -- the fourth straight quarter sales missed analysts’ estimates -- puts more pressure on co-Chief Executive Officers Jim Balsillie and Mike Lazaridis as they seek to revive a company that once dominated the U.S. smartphone market. RIM’s market-share decline has prompted investors such as Jaguar Financial Corp. to call for a change in leadership and for RIM to divide into separate companies or seek a sale.

“The next question from a management perspective is do they need someone different? They cannot keep going on the same course forever,” said Bahl & Gaynor Investment Counsel’s Matt McCormick, whose firm oversees $4.1 billion. McCormick, speaking from Cincinnati, said he’s “glad” his firm doesn’t own RIM stock.

RIM fell 9.7 percent to $16.77 at 4 p.m. in New York, percent, the most since its previous sales miss in September. The stock has lost 71 percent this year as Apple advanced 21 percent.

PlayBook Slump

RIM will record a $485 million pretax provision to revalue the inventory for the PlayBook tablet, which has failed to win over users in a market dominated by Apple’s iPad. RIM said more promotions are needed to drive demand for its tablet, whose shipments fell to 150,000 units last quarter, less than a third of the 500,000 tablets RIM shipped in the first quarter after they went on sale in May. In its most recent quarter, Cupertino, California-based Apple sold a record 11.12 million iPads.

“When the PlayBook is supposed to be the savior and it’s not, where do you go,” McCormick said.

RIM posted its first quarterly revenue decline in nine years in September, and is struggling to move its BlackBerry lineup onto a new operating system called BBX. The company’s U.S. market share sank to 9.2 percent in the third quarter from 24 percent a year earlier as consumers opted for Apple’s iPhone and phones from Samsung Electronics Co. and HTC Corp. that run Google Inc.’s Android software, according to researcher Canalys.

RIM’s current products “are now in terminal decline,” said Tavis McCourt, an analyst at Morgan Keegan & Co. in Nashville, Tennessee, who has a “market perform” rating on RIM shares. The BBX devices will be “crucial if there is ever going to be a turnaround.”

Further ‘Erosion’

RIM said device shipments in the fourth quarter will decline from the third quarter. In the fiscal third quarter ended Nov. 26, BlackBerry smartphone shipments were 14.1 million, in line with the company’s forecast.

“RIM’s soft fourth quarter outlook sustains concerns of further franchise erosion and raises the bar for a turnaround,” Mike Abramsky, an RBC Capital Markets analyst, said in a note today. He has a “sector perform” rating on the stock.

Analysts on average predicted third-quarter profit to decline to $1.20 a share and sales to slump to $5.31 billion, the average of estimates compiled by Bloomberg. RIM’s earnings forecast for the period was $1.20 to $1.40 a share.

The company also said it booked $50 million in costs for a service disruption customers suffered last quarter.

RIM plans to report detailed results for the third quarter on Dec. 15.

--Editors: Ville Heiskanen, James Callan

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net; Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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