RIM – dropping market share, stock prices, sales figures. Everything but the Co-CEO’s

Research in downward Motion – Proving once again that they are going nowhere fast.  Research in Motion was once a massive force in the wireless industry.  The fanboys were fat cat bankers, government officials, business executives, or celebrities.  It was THE phone.  It was so well loved that it gained a drug-moniker as a nickname.  Crackberry.

Those days keep falling further and further into the rearview mirror of modern cell phones.  Today it’s either Android or iOS.  The mighty giant has fallen.  The signs of complete and utter failure on nearly all levels have been covered by our good friends over at www.bgr.com with those in the know sharing their thoughts and emails.  The two-headed monster of a CEO has made a fool of itself a number of times in the past few months.  Products have been delayed, or in the case of the Playbook, should have been delayed.

RIM stated during their earnings call that the sales of their older lower-end devices fell “short of expectation.”  Really?  Short of the expectations of whom, exactly?  Your Co-CEO’s?  Analysts?  The public?  Supposedly it is all of the above.  I certainly hope this does not come as a surprise.

When I first heard of the Playbook I was excited, honestly.  I thought that the QNX operating system looked very good, it was new thinking, pushing the very square envelope over at RIM.  It had some potential.  Then it was released with the need to connect it with Blackberry phones and without email, calendar, and the only hot feature RIM had BBM.  The dropped the ball.  Unlike our beloved OS, Blackberry users are not typically accepting of half-baked snacks.  A Blackberry needs to work out of the box.

They say that the new devices released recently are being well received and selling briskly.  A single sad highlight.  RIM expects to see a 27-37% increase in smartphone shipments in Q3, which is nothing spectacular considering it is the holiday season.  I am willing to bet that their increase in shipments will fail to surpass even 20%. With some incredibly anticipated devices from both Android and iOS launching the next few months and QNX phones on the horizon and coming “soon” 20% is optimistic.

I actually believe that QNX might bring something to the table when it launches on phones.  The Blackberry bridge has some great features and could be a big boost to RIM’s standing in the smartphone market.  The QNX based OS is attractive, responsive, and potential.  I believe the devices must launch with NO delays and without any significant flaws in order to save RIM from disappearing into the great white north.

I have included the earnings call press release below for you to read if you so choose.

Research In Motion Limited (RIM) (NASDAQ: RIMM)(TSX: RIM), a world leader in the mobile communications market, today reported second quarter results for the three months ended August 27, 2011 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).


Revenue in the second quarter was $4.2 billion and service revenue surpassed $1 billion for the first time — GAAP net income of $329 million or $0.63 per fully diluted share; adjusted net income of $419 million or $0.80 per fully diluted share — The BlackBerry subscriber base grew 40% year over year to surpass 70 million — RIM’s largest roll-out of BlackBerry smartphones was initiated with 7 new smartphones launched with over 90 carrier and distribution partners in 30 countries during the latter part of Q2 — Approximately $780 million was invested as part of a consortium of companies that successfully bid to acquire intellectual property assets from Nortel — BlackBerry smartphone shipments in Q3 are estimated to grow between 27- 37% over Q2 shipments

Q2 Results:

Revenue for the second quarter of fiscal 2012 was $4.2 billion, down 15% from $4.9 billion in the previous quarter and down 10% from $4.6 billion in the same quarter of last year. The revenue breakdown for the quarter was approximately 73% for hardware, 24% for service, and 3% for software and other revenue. During the quarter, RIM shipped approximately 10.6 million BlackBerry smartphones and approximately 200,000 BlackBerry PlayBook tablets.

“We successfully launched a range of BlackBerry 7 smartphones around the world during the latter part of the second quarter and we are seeing strong sell-through and customer interest for these new products. Overall unit shipments in the quarter were slightly below our forecast due to lower than expected demand for older models,” said Jim Balsillie, Co-CEO at Research In Motion. “We will continue to build on the success of the BlackBerry 7 launch to drive the business as we focus our development efforts on delivering the next generation, QNX-based mobile platform next year.”

The Company’s GAAP net income for the quarter was $329 million, or $0.63 per share diluted, compared with GAAP net income of $695 million, or $1.33 per share diluted, in the prior quarter and net income of $797 million, or $1.46 per share diluted, in the same quarter last year. Adjusted net income for the second quarter was $419 million, or $0.80 per share diluted. Adjusted net income and adjusted diluted earnings per share exclude the impact of a pre-tax one-time charge of $118 million for the Company’s cost optimization program that was implemented in the second quarter of fiscal 2012. Details on the cost optimization program are available in the Company’s press release dated July 25, 2011 as well as in Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal period ended August 27, 2011, which will be filed shortly. This charge and its related impacts on net income and diluted EPS are summarized in the table below.

Reconciliation of GAAP net income to adjusted net income (United States dollars, in millions except per share data) For the quarter ended August 27, 2011 ————————– Net Income Diluted EPS ————————– As reported $ 329 $ 0.63 Adjustment: Cost optimization program, net of income tax(1) 90 0.17 ————————– Adjusted $ 419 $ 0.80 ————————– ————————–

Note: Adjusted net income and adjusted diluted earnings per share do not have any standardized meaning prescribed by GAAP and thus are not comparable to similarly titled measures presented by other issuers. The Company believes that the presentation of adjusted net income and adjusted diluted earnings per share enables the Company and its shareholders to better assess RIM’s operating results relative to its operating results in prior periods and improves the comparability of the information presented. Investors should consider these non-GAAP financial measures in the context of RIM’s GAAP results.

(1) During the second quarter of fiscal 2012, the Company implemented a cost optimization program to streamline operations across the organization. The Company incurred approximately $118 million in total pre-tax charges related to the cost optimization program. Substantially all the pre-tax charges are related to one-time employee termination benefits and the identification and elimination of redundant facilities, with the charges included in the relevant line items in the Company’s consolidated statement of operations. During the second quarter of fiscal 2012 pre-tax charges of approximately $13 million were included in cost of sales, charges of approximately $19 million were included in research and development, and charges of approximately $86 million were included in selling, marketing and administration expenses. Additional charges for headcount related costs associated with our cost optimization program may also be incurred in subsequent quarters.

The total of cash, cash equivalents, short-term and long-term investments was $1.4 billion as at August 27, 2011, compared to $2.9 billion at the end of the previous quarter, a decrease of $1.5 billion from the prior quarter. Uses of cash included strategic purchases of intellectual property assets associated with RIM’s participation in a consortium of companies that successfully bid to acquire Nortel Networks Corporation’s patent portfolio, of which RIM’s cost is approximately $780 million, capital expenditures of approximately $285 million, and working capital requirements.

Q3 and FY2012 Outlook

Revenue for the third quarter of fiscal 2012 ending November 26, 2011 is expected to be in the range of $5.3-$5.6 billion. Gross margin percentage for the third quarter is expected to be approximately 37%. BlackBerry smartphone shipments are expected to be between 13.5 million and 14.5 million units. Adjusted earnings per share for the third quarter, excluding the impact of charges related to the Company’s cost optimization program, is expected to be in the range of $1.20-$1.40. Adjusted diluted earnings per share for the full year fiscal 2012, excluding the impact of charges related to the Company’s cost optimization program, is expected to be towards the low end of the previously guided range of $5.25-$6.00.

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