WATERLOO - Research In Motion (RIM) shares soared nearly 20% in after-hours trade following news that earnings, while still bad, didn’t amount to the death spiral that was predicted. The results have led to new hopes for a revival as the company will have the cash reserves necessary to ramp up production of its new BlackBerry 10 devices due in early 2013 and market them to the world.
In a conference call with investors, RIM President and CEO Thorsten Heins predicted the release of the Blackberry 10 would enable them to increase their smartphone market share.
“The market today is at 30% of smartphone penetration on average. So we are pretty confident that if you think about the people moving from feature phones to smartphones, then we can also catch a significant share of these because we are really providing with BlackBerry 10 a whole new user experience.”
RIM surprised the market after reporting a loss of only $235 million or 45 cents a share compared with a profit of $329 million a year ago. However excluding one-time costs, including cost cuts and job reductions, RIM posted an adjusted loss of $142 million or 27 cents per share. Analysts had been expecting RIM to post US$2.5-billion in sales and a loss of 47¢ per share. Revenue during the quarter slid 31% year-over-year to $2.87 billion from $4.17 billion a year ago.
Shipments of BlackBerry smartphones were 7.4 million in the quarter, easily outpacing Wall Street's expectation of about 6.9 million shipments in the period and it sold 130,000 PlayBooks.
Adding to positive news was that RIM’s customer base has grown to 80 million customers, up from 78 million last quarter. The growth comes from Asia-Pac, Indonesia, South Africa, and Philippines.
"Despite the significant changes we are implementing across the organization, our second quarter results demonstrate that RIM is progressing on its financial and operational commitments during this major transition," said Heins in a news release.
"Subscribers grew to approximately 80 million global users, revenue grew sequentially from the first quarter, cash, cash equivalents, short-term and long-term investments increased by approximately $100 million to $2.3 billion, and carriers and developers are responding well to previews of our upcoming BlackBerry 10 platform. Make no mistake about it, we understand that we have much more work to do, but we are making the organizational changes to drive improvements across the company, our employees are committed and motivated, and BlackBerry 10 is on track to launch in the first calendar quarter of 2013."
The total of cash, cash equivalents, short-term and long-term investments was $2.3 billion as of September 1, 2012, compared to $2.2 billion at the end of the previous quarter, an increase of approximately $100 million from the prior quarter.
RIM cautioned that there will be continued pressure on operating results for the remainder of the fiscal year based on the increasing competitive environment, lower handset volumes, increased marketing expense associated with the launch of BlackBerry 10, and some impact from pressure by customers to reduce RIM's monthly infrastructure access fees.
It also plans to continue to invest in targeted marketing and sales programs to aggressively drive sales of BlackBerry 7 handheld devices before the anticipated launch of the BlackBerry 10 smartphones. The company expects to report an operating loss in the third quarter of fiscal 2013 as RIM continues to work through the transition to BlackBerry 10 and completes its Cost Optimization and Resource Efficiency (CORE) program. Manufacturing and supply chain is a focus of the CORE program; RIM wants to streamline manufacturing, by dropping from 10 to three manufacturing sites.