As competition that is as inevitable as gravity itself both validates
our contrarian thesis and causes Research in Motion’s stock to imitate
amateur base jumpers, sans parachute…
From CNBC: RIM Shares Plunge After Firm Lowers Guidance
Research In Motion
shares were hammered in after-hours trading Thursday after the
BlackBerry maker lowered its earnings and revenue guidance for the first
quarter. Shares resumed trading at 4:30 pm ET after being halted for
more than 20 minutes. Get after-hour quotes for Research in Motion here.
The company said it expects first-quarter earnings of between $1.30
to $1.37 a share short of analyst expectations of $1.48 a share.
Also, RIM said it sees first quarter revenue slightly below its previous guidance of between $5.2 and $5.6 billion.
RIM blamed the move to weak shipments of its BlackBerry phones and a
shift toward handsets with lower price points. The firm has been
struggling to compete against Apple’s popular iPhone and other rivals of the smartphone market.
From Bloomberg: RIM Plunges as Analysts See Lost Credibility With Forecast Cut
Research In Motion Ltd. (RIMM) plunged in
late trading yesterday as analysts said a r duced profit forecast hurts
management’s credibility and raises pressure on the company as it heads
into an annual trade show next week… “This further damages already low
credibility, making them the ‘poster boy’ for a show-me story from
here,” Mike Abramsky, an analyst at RBC Capital Markets
in Toronto who has a “top pick” rating on the company, said in a
research note. “Management needs to deliver on the product side,” said
Taylor, who manages about $14.5 billion including RIM and Apple shares.
“That includes competitive next-generation smartphones and building out
the app library.” Apple offers more than 350,000 software applications,
or apps, and Google’s Android Market has more than 150,000, compared
with more than 25,000 in BlackBerry App World. RIM fell $6.17, or 11
percent, to $50.43 in late trading yesterday, after closing at $56.59 on
the Nasdaq Stock Market. It has lost 2.7 percent this year as of
Co-Chief Executive Officer Jim Balsillie
told analysts on a conference call yesterday that he wished the new
products would come sooner to replace current BlackBerry devices. “The
issue is an aging that happens in your higher-end products and it
affects margin,” said Balsillie. “All things being equal we would love
to have these products earlier and not be having this call. Because it’s
such a big upgrade, it takes longer.” In updating its forecast, RIM
said BlackBerry shipments will be at the lower end of the range of 13.5
million to 14.5 million it projected last month, and the mix of devices
will shift toward cheaper models. Sales in the quarter ending May 28
will be “slightly below” the $5.2 billion to $5.6 billion the company
had forecast. Analysts had predicted earnings of $1.50 a share on sales
of $5.44 billion, the average estimates compiled by Bloomberg.
‘Off a Cliff’
“The sales on their existing devices must have fallen off a cliff,” said Matt Thornton, an Avian Securities LLC analyst in Boston
who has a “neutral” rating on the stock. “They are getting hit by a
combination of a stale portfolio and heated competition on devices.” RIM
said shipments of its PlayBook tablet computer, which started selling
in the U.S. April 19 to challenge Apple’s iPad, are in line with its
The Playbook pales in comparison to the competition. The iPad 2 pwns
it! Asus has come out with an Android Honeycomb tablet that literally
enables you to do REAL work with 16 hours of battery life and a
realistic keyboard. .
Samsung has come out with a tablet under 9 mm thick, thinner, lighter
and faster than the iPad. LG is pushing glasses free 3D tables. And then
there are about 200 other competitors. RIM is lost!
RIM’s share of worldwide smartphone sales
slipped to 14 percent in the fourth quarter from 20 percent a year
earlier, according to Canalys, a British research company. Apple’s share
was unchanged at 16 percent, while Android’s more than tripled to 33
percent. The forecast shows that higher-end BlackBerrys like the Torch,
designed to compete with the iPhone and Android devices, are missing
estimates, said Michael Walkley, an analyst at Canaccord Genuity Ltd.
“Higher-end phones have not sold so well,”
said Walkley, who has a “hold” rating on the stock. “The investment
community was already skeptical about the full-year guidance of $7.50
and this gives them reason to be more skeptical.”
Now, let’s do this by the numbers – reverse chronology to be exact…
Research in Motion Drops 10% After Hours, Precisely As We Warned Two Months Ago – MARGIN COMPRESSION!!! Thursday, March 24th, 2011
Lost More Market Share Than We Bearishly Anticipated While RIMM’s
Share Price Spikes: Is It Time To Revisit the Bear Thesis? Thursday, January 20th, 2011
And from the valuation section of our Forensic Report (those who have downloaded it can refer to page 30)…
As you can see, we did a phenomenal job at anticipating the share
price fall and the practical floor. Those of you who used options and/or
leverage with proper risk management should have benefited handsomely.
Of course, this particularly industry segment moves much more rapidly
than most, which is why we have taken the opportunity to add
flexibility in our valuations and analysis (page 32)…
As is usual, I welcome any and all to compare BoomBustBlog research
to anything available from the sell side. I am confident many will wish to subscribe
after an apples to apples comparison. This report release to the public
is done in anticipation of the much more comprehensive, 65 page Google
Forensic Valuation (hopefully by later on today or tomorrow morning)
and the upcoming Apple Forensic Valuation. Please keep in mind that the
Research in Motion story is not over, by a long shot. It looks as if
they may have pulled a much needed rabbit out of their hat with their
new tablet, but at this point it is still vaporware from our perspective
since I have yet to get my hands on one. If it is what it is chocked
up to be, it will then be up to management to execute. Their track
record over their last 3 attempts at larger screen form factors have
been wanting, at best, but maybe the fourth time around is a charm.
Professional subscribers should take advantage of the interactive
valuation tools that I have made available to adjust the assumptions in
the valuation model to keep abreast of the RIM situation (see RIMM Multivariate Valuation Model).
We have not updated the assumptions since before the earnings
announcement, so there is some fine tuning to be done regarding the
valuation report, but the gist of the story remains the same, and the
report’s premise remains quite valid. I recommend all paying subscribers
use the market share tools to assist in fine tuning their assumptions
moving forward. This is a rapidly changing landscape, and what was once
the underdog may become the champion – seemingly overnight. I,
personally, am still quite skeptical of RIM management’s ability to
execute in this environment, but I am keeping my eyes open.
Previous Research in Motion commentary
Quick Thought On How Research in Motion Can Maintain Their Market Share and Take Even MoreTuesday, September 21st, 2010
A Quick Review of Research in Motion’s Q2 2011 Earnings Announcement Monday, September 20th, 2010
- The Blacker the Berry, the Smaller the Market Share?
- Despite What May Appear to Be Strong Fundamentals RIMM Is In Trouble, Look Past the Present and Into the Future
- BoomBustBlog Research Opinion Hits the Mainstream Media, Sort Of…
- As I Have Anticipated, There is Absolutely No Fire in the Torch, Except for the One That’s Frying RIMM’s Share Price
- After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play
- RIM Smart Phone Market Share, RIP?
- This Quarter Offers a Lot of Challenges for Smart Phone Vendors with Fruit in Their Names!
- Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion
- The BoomBustBlog Multivariate Research in Motion Valuation Model: Ready for Download
Research in Motion Continues Its Inevitable Downward Descent In
Both Equity Value and Market Share, Investors Should Tweak Their