Not Gossip: Research in Motion Lowers Guidance
Sellers have been battering Research in Motion (RIMM-NASDAQ) for weeks; product glitches and competition from Apple, Nokia and even PALM have been weighing on the stock.
When the stock cut through $100 earlier this fall many Sellsiders were whispering that their handsets were rapidly turning into commodities, and that margins were likely to come under pressure.
That scenario appears to be playing out...but by 4PM Wednesday all of it should be in the stock. I did not expect to see the stock trading at roughly 1.5x forward revenue, but that is the new reality, and Blackberry has finally met its Waterloo, in the form of lowered guidance:
Research In Motion lowers Q3 revenue and EPS guidance (37.32 ) : Co issues downside guidance for Q3 (Nov), sees EPS of $0.81-0.83, excluding non-recurring items, vs. $0.91 First Call consensus; sees Q3 (Nov) revs of $2.75-2.78 bln vs. $2.96 bln consensus. Preliminary revenue is lower than the previously forecasted revenue range of $2.95-$3.10 bln.
Co notes approx one third of the difference between forecasted and preliminary revenue is expected to be a result of the depreciation of certain foreign currencies relative to the U.S. dollar in the quarter. The remaining difference is primarily due to lower than estimated unit shipments of existing products, which RIMM believes is a reflection of general economic weakness in the U.S. and shifts in product launch dates within the quarter.
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No xoxo for RIM
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Subject to final review, gross margin in the quarter is expected to be between 45-46%. The lower than expected gross margin is due primarily to product revenue mix and foreign exchange impacts within the quarter. EPS is anticipated lower due to lower-than-estimated revenue and the unfavorable impact of the strengthening U.S. dollar. Co expects the number of net new BlackBerry subscriber accounts added in the quarter to be approx 2.6 mln, which is lower than the 2.9 mln previously forecasted and reflects a 57% increase over the same quarter of last year.
The hype over the Blackberry Bold sure seems like a long time ago, and not even the product placements on the TV show Gossip Girl have saved the day. RIM’s fate might be in Obama’s hands now...perhaps an endorsement deal with the President Elect can be inked, with the fees going to reduce the Federal deficit.
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Research In Motion Misses Forecasts, Signaling Industry Slump
Bloomberg
Is this the beginning of the end for RIM?
Financial Post
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