BlackBerry maker RIM: ‘Likely to fail’ as one analyst says, or set to for a razor-thin profit?
Published on Thursday June 28, 2012
As it waits for its saviour, struggling BlackBerry-maker Research in Motion has a few things to get through first.
Namely, the next couple of quarters, before phones running its long-awaited, make-or-break BB10 operating system come to market.
The Waterloo-based company has said they’re likely to reveal an operating loss in their fiscal first quarter results today. That admission came from CEO Thorsten Heins last month, who blamed the “competitive environment.”
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Among other harsh assessments: RIM faces a “black hole,” in its August quarter, suggested Jefferies and Co. analyst Peter Misek.
And the company’s business “is likely to fail,” claimed Brad Erickson, of Pacific Crest securities. (Erickson also said RIM should stick with its current go-it-alone strategy, rather than selling off parts of the company — including its portfolio of patents — piece-meal.)
RIM shares have fallen more than 37 per cent this year alone, and were down again today; by 12:45, they’d dropped to $9.27, a loss of 17 cents on the day. From a peak of roughly $60 billion in 2008, RIM’s market capitalization has now dropped to less than $5 billion, a fall of more than 90 per cent.
Here are three areas to watch when RIM delivers it earnings after markets close:
Red or black?
Most analysts believe the company is going to announce another quarterly loss. It would be, by the way, RIM’s second straight quarterly loss after the company announced a $125 million shortfall for its fiscal fourth quarter in late March.
But how big a loss is far from clear.
One of the more bearish outlooks comes from Scott Sutherland of Wedbush Securities, who predicts RIM will announce a loss of $63 million, or 12 cents per share.
Peter Misek, meanwhile, figures RIM will announce a loss of $3 million for the quarter, or a loss of 1 cent per share.
Somewhat surprisingly, Morgan Stanley’s Ehud Gelblum, whose devastating report on Monday led to an almost eight per cent drop in RIM’s share price, believes RIM will announce the thinnest of profits. Gelblum is expecting a profit of $1.3 million in the quarter, which translates into earnings of less than a cent per share.
Whittle while you work
Will RIM announce more details of the job cuts it has already said are under way?
The company aims to save at least $1 billion by next year, through cutting its 16,500-person workforce, and through increasing supply chain efficiency. To this end, the company recently parted ways with Toronto-based electronics manufacturer Celestica.
Earlier this week, Morgan Stanley’s report on RIM said that if the company is to survive, it will need to cut roughly 90 per cent of its staff. In late May, there were reports that RIM was looking to trim anywhere between 2,000 and 6,500 jobs over the next six to nine months.
The company didn’t confirm the numbers, but acknowledged it was looking to save money. At the time, analysts suggested that despite the cutbacks, RIM would likely still be hiring some workers, especially in areas related to BB10.
Psst, want a subscription?
Another key number analysts will be watching is of RIM subscribers. For each BlackBerry user, RIM gets a monthly subscription fee from that user’s telecommunications company. Most analysts peg it at $4 to $5. In Heins’s update last month, he said RIM had 78 million subscribers, up from roughly 77 million the previous quarter. While adding a million subscribers sounds like a lot, it’s a much slower growth rate than RIM had previously experienced. The trend isn’t promising, says BMO Capital analyst Tim Long.
“We believe the subscriber base is poised to start declining, and the recurring revenue will likely follow,” Long wrote in a recent report. “Service revenues have offered some level of support for the stock, and a decline will be negatively perceived.”