The Research In Motion earnings call was entertaining, awkward, and hyperbolic as usual! I’ll give some key takeaways from the call, and then follow up with a brief analysis of RIM’s outlook.
-Earnings and gross margin guidance was called “atrocious” by CNBC’s Guy Adami. Guidance includes management’s expectations on the Playbook launch, which it said would be a “big selling” product. VP Investor Relations Adele Ebbs said the Playbook would be lower margin than RIM’s corporate margins (41% in the quarter). Lower average selling prices on products and higher marketing expenses were given as other reasons for lower margins. Margin compression is expected despite increased product mix of the relatively high-margin Blackberry 8520, and other products that are late-stage (nearing end-of-life) and thus are typically higher margin as well.
-Japan supply-chain issues with smartphone components are said to potentially affect revenue. This was said to be a reason for the larger range for earnings and revenue guidance.
-Management confirmed QNX-based “superphones” are coming in calendar 2012, and this was seen as somewhat of a surprise by RBC analyst Mike Abramsky. This led some analysts to ask whether there would be risk of a lack of uptake of RIM smartphones until next year, but Co-CEO Jim Balsillie claimed there was tremendous interest in this summer’s new products based on OS 6.1 and they were claimed to be a major upgrade.
-Balsillie responded to a question about future entry level smartphones at lower price points positively, though these wouldn’t be coming out this calendar year.
-Ebbs and Balsillie said there will be no new products other than the Playbook until fiscal Q2 (June-Aug) and Q3.
-Management statements hint that RIM overstuffed the sales channel at the end of last quarter though they also claimed inventories are lower because of higher sell-through. This seems contradictory but it wasn’t explained further.
-On a positive note, RIM execs are forecasting much higher than expected earnings for fiscal year 2012 of $7.50, yet they didn’t seem very confident in that forecast.
The bottom line is that more than 4 years after the iPhone disrupted the industry, RIM’s Blackberry OS products are no longer competitive at any price-point without margin deterioration. There is a now a lot of uncertainty and skepticism in RIM’s product launch schedule, platform strategy, differentiation, and ability to execute and innovate at a level and pace competitive with Apple and Google.
Image from: http://www.cantechletter.com/2010/05/10-moments-in-canadian-tech-stock-history-that-changed-the-world/
