RIM announces 1st quarter earning; Investors call takeaway: BlackBerry 6 before the end of September

By Kevin Michaluk on 24 Jun 2010 07:03 pm EDT
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Research in Motion

Research in Motion announced their Q1 2011 results today, which you can read in the press release below. While the numbers are still pretty darn impressive, the stock did take a small hit in after-hours trading for missing the street's expectations slightly. Listening in to the investors call, it definitely seemed that at least part of the blame here was the timing of the BlackBerry Bold 9650 and Pearl 3G rollouts, which happened a little later than RIM was initially planning (nothing out of the norm by the sounds of it - just testing and approvals that took a little longer than planned).

As was the case from the previous investors' call, RIM's Co-CEO Jim Balsillie still seemed very optimistic about RIM's opportunities and the quarters ahead (especially the back half of the year where you'll start to see "acceleration" happen). RIM is clearly happy about their adoption in international markets, which is now making up some 40% of their growth.During the prepared statement, Balsillie stated that BlackBerry 6 would be launched before the end of September, but during the Q&A it became clear that the next quarter should see some benefit from new devices with higher ASPs, so hopefully we'll see it even sooner.

Jim also iterated on the call what we have been saying for a while now on our CrackBerry Podcasts.... RIM sees the biggest opportunity in mobile right now being all of the current feature phone owners upgrading and buying devices that use data - it's a bit of a land grab right now. That doesn't mean RIM wants to become a low-end player (Nokia) though. At the same time Jim made it pretty clear that RIM has a lot of good things coming (including some surprises) and they'll work hard to keep innovating and to execute.

Press Release

Research In Motion Reports First Quarter Results and Announces Share Repurchase Program

WATERLOO, ONTARIO--(Marketwire - June 24, 2010) - Research In Motion Limited (RIM) (NASDAQ:RIMM)(TSX:RIM), a world leader in the mobile communications market, today reported first quarter results for the three months ended May 29, 2010 (all figures in U.S. dollars and U.S. GAAP, except where indicated).

Highlights:

  • Revenue grew 24% over the same quarter last year to $4.24 billion
  • Earnings per share in the first quarter increased 41% year over year to $1.38(1)
  • BlackBerry(R) smartphone shipments grew more than 43% over the same quarter last year to 11.2 million and RIM shipped its 100 millionth BlackBerry smartphone during the quarter
  • BlackBerry subscriber account base grew approximately 60% over the prior year to 46 million, with 4.9 million net new subscriber accounts added in Q1
  • RIM's Board of Directors approved a share repurchase program to purchase for cancellation up to 31 million common shares

Q1 Results:

Revenue for the first quarter of fiscal 2011 was $4.24 billion, compared to $4.08 billion in the previous quarter and up 24% from $3.42 billion in the same quarter of last year. The revenue breakdown for the quarter was approximately 79% for devices, 16% for service, 2% for software and 3% for other revenue. During the quarter, RIM shipped approximately 11.2 million devices.

Approximately 4.9 million net new BlackBerry subscriber accounts were added in the quarter. At the end of the quarter, the total BlackBerry subscriber account base was approximately 46 million.

"RIM achieved significant earnings growth and shipped a record 11.2 million devices during the first quarter, including its 100 millionth BlackBerry smartphone," said Jim Balsillie, Co-CEO at RIM. "We continue to be focused on growing our business globally and we believe that the range of exciting new BlackBerry products being released in the coming months will create significant opportunities to accelerate RIM's growth in the second half of the fiscal year."

Net income for the quarter was $768.9 million, or $1.38 per share diluted, compared with net income of $710.1 million, or $1.27 per share diluted, in the prior quarter. Net income in the same quarter last year was $643.0 million, or $1.12 per share diluted which reflected an adjustment of $0.14 per share related to certain unusual items that were recognized in the first quarter of fiscal 2010.(1)

The total of cash, cash equivalents and investments was $3.27 billion as at May 29, 2010, compared to $2.87 billion at the end of the previous quarter, an increase of approximately $400 million. Cash flows from operations in Q1 was approximately $1.12 billion, which was offset primarily by common shares repurchased of approximately $410 million and property, plant, and equipment as well as intangible asset acquisitions of approximately $270 million.

Q2 Outlook:

Revenue for the second quarter of fiscal 2011 ending August 28, 2010 is expected to be in the range of $4.4-$4.6 billion. Gross margin for Q2 is expected to be approximately 44%. Net subscriber account additions in the second quarter are expected to be in the range of 4.9-5.2 million. Earnings per share for the second quarter are expected to be in the range of $1.33-$1.40 per share diluted.

Reader comments

RIM announces 1st quarter earning; Investors call takeaway: BlackBerry 6 before the end of September

40 Comments

jim says two major releases this current quarter and then he says blackberry6 will be out before the end of sebtember so the slider has blackberry6 the clamshell has blackberry6 what are are they planning to release this quarter that doesnt have blackberry6 by the way this current quarter ends augost 24 see the confusion can someone clear this up

Exactly. I was confused too as were the analysts who asked during the Q&A. So it's either:

a) BB6 will launch sooner than end of September, but RIM doesn't want to overpromise on the date just in case

b) the Bold 9650 and Pearl 3G launched fairly late, so these are the devices RIM is thinking will help carry a higher asp through next quarter..though not sure that makes sense

or

c) there's something launching that'll still hit with 5 (then get 6?). though this seems weird.

so yeah..i'm confused too. will have to wait and see.

Kevin, Its definately not B becuase Adel said it was hard to forecast the revenues for Q2 because the impact of the new devices would be coming at the end of Q2 and beginning of Q3.

According to TD Newcrest report:

Last quarter Jim Balsillie was quite assertive in suggesting that if we knew what was coming, we (the Street, collectively) would not be so bearish. With a full quarter having passed since that time, the Co-CEO reiterated this stance. Furthermore, he suggested that a “quantum leap” was coming in terms of the company’s multimedia strategy and that if we could only “wind the clock forward a few weeks”, we would better understand what the company intends to do, competitively. As bullish as we are on RIM stock, we can’t help but be a bit skeptical about these claims because we’ve heard them often before. That said, it sounds as if the “great unveiling” is near, and we are intensely interested in RIM’s multimedia strategy.

I sure am glad RIM feels so highly of themselves. Some devices were just officially released with OS 5.0, now they say OS 6.0 is less then 4 months away? Funny, my Tour (RIM's bastard child) isn't even compatible with OS 6.0, yet it is less then a year old. RIM lost themselves another customer. Stupid Canadians.

stupid canadaians screw you!!!!!!!!!!!!!!!!!!!!!!! last time i checked u f*cken americans went bankrupt for buying to many T.V!!!!!!!!!!!!!!!!!!!!!!!!!!

Kevin -
i listened to the call as well, it sounded to me like they were saying they are looking to launch it into Q2/Q3. We are in Q2 now, ending Aug 24, but Mike/Jim did mention on the call that "summer is slow, well... except for the back to school period". So if you take the 2 comments together, it seems as if they are looking to push the Torch9800 out in August for back to school (and therefore grabbing late Q2) but mostly Q3 out of it. As far as the flip, i think thats the Q3 device they are taking about. Not sure how it would be high ASP though? Perhaps it may be, as it will be the only smartphone in the form?

it also sounds like appworld is literally due out in the next few weeks, and the whole BB Shield due out in mid Q3? Cause they said late this year, so that would sound like so. Probably in late september, early October? just my thoughts.

RIM needs to learn how to just get their stuff out the door. If they just had a little urgency they could get AppWorld 2.0 out by the end of the week, and the 9800 by the end of July.

Instead I get the feeling that AppWorld 2.0 is being delayed until they can get more carrier billing deals done instead of making the many improvements that are already done available, and adding the other features latter.

The same way I feel that OS6 is being delayed due to some small thing such as Flash support that could be added latter (or honestly never).

Any manufacturer who throws their product out to the public without giving it thorough testing is just asking for trouble. Just look at Apples iPhone 4 for example. They wanted to get it out there for the masses today only to realize that their new phone is having issues keeping a signal thanks to their redesigned antenna. Now they have a bunch of customers griping about how they keep dropping calls. Testing is essential!!! Otherwise you end up with POS for a product.

Yea just the way RIM threw the POS Storm out there without testing. Still the biggest POS I've ever owned.

after this next buy back is over within the next 12 months they have taken off the table including last years buy back of 18 million shares and this years buy back of 31 million shares they have taken off 10% of the outstanding shares off the table so if they keep this up in the next 5to6 years the could be have taken off about 30% of shares wow what are they up to why wouldnt they just give a dividen

They would be obligated to pay a dividend. The share repurchase plan just gives them the option to buy the shares. In a market with patent landmines always lurking, it's much better to keep the cash on hand.

the repurchase is good, hopefully it lifts the stock upwards. the stock is performing worse than GARMIN! (and garmin is about to be wiped out by smartphones taking over all gps functionality!)

Only 11 x EPS on RIM. Amazing deal right now IMO. Even NOK is trading at almost 20 x EPS. RIM's shares are beaten down so much for a profitable company that is growing hugely and sitting on over $3 billion in cash. Also, looks like North American subs were up 8% which defies all those who say that RIMM is losing out in North America. Even with revenue slightly below Wall Street's estimates, it’s hard to complain about YoY revenue growth of 24% and device shipment growth of 44%.

Does anyone think RIM will have an OS 6 update on the Bold 9650? That would be pretty cool, unless they're only allowing for the OS 6 to be already pre-loaded onto their new devices, which I hope isn't the case.

They have bumped up the memory so it will be possible to run it on this device. So most likely ot will have a update rolled out for it. A safe guess would be late Q3 or maybe even into Q4

That is not acceptable...don't compare the iPhone 4 to anything black berry is offering right now. The storm wasn't rushed it just sucked. No excuses anymore jeez

The lighter revenue is likely due to currency changes but the profit is a good sign and the margin strength is especially encouraging. They seem to be creeping back to the glory days of 50% margins.

OS 6 and the 9800 are going to be a shadow over this current quarter if they don't get them out in August but they seem to be hanging in strong.

In a year that has seen Palm collapse, Nokia issue profit warnings, Motorola plan a spinoff to escape billion in debt and HTC unable to secure parts, RIM continues to show they can survive in a market that the media has awarded to Apple. Another quarter, another record shipment number.

Now they just need to get that slider in my hands.

currency had nothing to do with it, they hedge themselves for a 10% swing in currency between the doller and euro. this is done so that they can give a more accurate EPS and stick to EPS despite currency fluctuations. basicaly, they make sure they are making money regardless of what happens with currency.

and with respect to margins, i would rather see lower margins and higher rev and asp. margins are only higher due to the curve outselling the bold. RIM wants to push more bold than curve due to the higher ASP.

True, but the guidance for the next quarter with higher ASP models is still expected to be 44% and they expect them to remain in the low 40s for the rest of the year. Considering some analysts had expected RIM to face a Nokia like slide in margins, seeing them hold their margins is a good sign that the company is managing their costs.

In the end, RIM may own the Corporate Business user but if OS6 doesn't deliver, I believe they will lose the mid-tier user whose main goal is to be organized. My kids recently got Android based phones and I am thoroughly impressed. The interface is strong and the apps are interesting. In my opinion, if OS6 can't compete with the flexibility and impressive look & feel, they will struggle to sustain market share when consumers hit their phone refresh cycle.

Sorry to be a spoil-sport. However, smart as Jim and company are, they aren't Kreskin or the Great Carnack. If they were, Jimmy wouldn't have started trying to buy the Coyotes.

My smart-ass way of saying that I don't think they were talking about the Q1 20*11* numbers today - more like Q1 20*10*.

I bought the Bold9700 6 months ago which I heard was the top of the line blackberry, but now the new operating system 6 won't work on it...so I have a top tier device that's obsolete? Really? Might be moving to iPhone if this is true.

I think revenues will be even greater after OS6. And if you bought a device 6 months ago and OS6 will come out when it is 9 months yes its obviously going to be obsolete especially when the new devicves are out.

The street is selling off BB Stock. Outlook is harsh. RIM has lost(or never had) touch with its customers. They will probably always have the business market but the consumer market however, I feel they have officially lost. Other companies striving to stay ahead of the market. RIM feels they are the market, so they have a lackadaisical attitude toward their product.
Everyone always blames delays on testing; you gotta test it blah blah.... If that were the case would we have ever seen the Storm 1?? What a travesty, lets not forget about all the poor tour owners. Phone after tired phone after tired phone, useless OS upgrade after useless OS upgrade.. Im out. After almost three years with my BB I am so done with this company, heading for FROYO. RIM refuses to be innovative. I mean look at these phones?? Their ace in the whole is this slider?!?...........Scary

Tip, instead of using your capital to buy up your stock, why not spend it on R&D??????????

i haven been a BB user for years...before it was cool to have one. I love blackberry; but i am growing tired of watching htc and apple leave BB in the dust. The app store needs to get better, the web browser is a joke compared to apple. Hopefully, OS 6 will improve the BB experience; but if it is not pushed to my Bold 9650 then my 9650 will be my last BB.