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6/16/2011
05:07 PM
Eric Zeman
Eric Zeman
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RIM Sells 500,000 PlayBooks, 13.2 Million BlackBerrys

The fiscal first quarter wasn't great for Research In Motion, which is losing phone sales to Android phones and iPhones. Worse, some product delays loom.

For its fiscal 2012 first quarter, RIM today reported revenue of $4.9 billion, which is 16% up from the year-ago quarter, but down 12% from the previous quarter. More than three-quarters (78%) of RIM's earnings came from hardware sales. The remaining revenue came from services (20%) and software (2%). The BlackBerry maker shipped 13.2 million smartphones, which was 300,000 shy of analyst estimates. It also shipped "approximately" 500,000 PlayBooks during its first quarter of availability.

Net income for the quarter was $695 million, compared to net income of $769 million in the same quarter last year and net income of $934 million in the previous quarter.

These numbers aren't a disaster, but they show that RIM's position in the market is weakening. It is clearly losing sales to Android and iPhone smartphones. It has forsaken its line of BlackBerry handhelds during the first half of 2011 in order to bring the PlayBook tablet to market. The drop in handset sales confirm that RIM could have done better with its phones.

As for the PlayBook, 500,000 is a really good start, but let's not forget that RIM says that it "shipped" 500,000 PlayBooks. It didn't say it sold 500,000. RIM has probably stuffed the channel as full as it can with PlayBooks. RIM didn't specify how many it actually sold to end users.

But RIM has more problems.

It issued guidance for its second fiscal quarter and the whole 2012 fiscal year. It says it will earn between $4.2 and $4.8 billion. It slashed its yearly earnings forecast by 20%. RIM is obviously caught in a tough transitional period as it struggles to respond to the onslaught from Apple and Google.

"Fiscal 2012 has gotten off to a challenging start. The slowdown we saw in the first quarter is continuing into Q2, and delays in new product introductions into the very late part of August is leading to a lower than expected outlook in the second quarter," said Jim Balsillie, Co-CEO at Research In Motion in a statement.

Balsillie's second sentence is noteworthy. RIM had initially indicated that its new BlackBerry 7-based smartphones, the Bold Touch 9900/9930, would be available mid-summer. Now it appears they have been delayed until late August. Such a delay will create a span of nearly nine months between brand new BlackBerry introductions. That's inexcusable.

Seeking to assure investors, however, Balsillie continued, "RIM's business is profitable and remains solid overall with growing market share in numerous markets around the world and a strong balance sheet with almost $3 billion in cash. We believe that with the new products scheduled for launch in the next few months and realigning our cost structure, RIM will see strong profit growth in the latter part of fiscal 2012."

Balsillie's always-bullish outlook isn't going to stop RIM from cost-cutting measures--namely, layoffs. In its earnings report, RIM indicated that it will take steps to reduce redundancies in staffing to focus on its highest growth opportunities. RIM will start layoffs this quarter, though it doesn't expect to see any benefits from the headcount reduction until the third quarter.

RIM has a lot of work to do to reinvigorate its place in the market and reassure investors that it can recover from this worsening slump.

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