TORONTO—Research In Motion Ltd.’s executives won’t say the company’s new line of BlackBerrys is a flop, but some investors have already made up their mind.
The company’s shares tumbled 28% on Friday after RIM reported it shipped far fewer new BlackBerry phones than analysts had expected in its fiscal first quarter.
Chief Executive Thorsten Heins has staked the company’s future on a new operating system, BlackBerry 10, which it unveiled early this year, and a bevy of phones that run off it. Many investors have bet this turnaround plan could work, sending RIM’s shares up 59% in the 12 months before Friday’s news.
On Friday, RIM said it shipped 2.7 million new smartphones in its latest quarter, a fraction of what Apple Inc. sold in its latest period and about half the number sold by struggling rival Nokia Corp.
The disappointing numbers raise questions about whether RIM can gain steam in a market saturated by smartphones from Apple and Korea’s Samsung Electronics Co.
Rather than enjoy an initial burst of shipments, RIM is now forced to ratchet up spending to jump-start sales. On Friday, Mr. Heins defended the launch as “still in its early stages,” promising to increase spending over the next three quarters in rolling out new phones and services.
Investors retreated on Friday, sending shares down to $10.46, erasing more than $2 billion in market value.
The Z10 phone received generally positive reviews ahead of its February launch, and RIM initially said that device and a keyboard-equipped Q10 were selling well in many markets.
RIM said Friday it shipped 6.8 million BlackBerrys in its first quarter, which ended June 1, up from 6 million the previous quarter. But it said only 40% of those were Z10s or Q10s. That was at the bottom of a wide range of analyst forecasts.
RIM said its base of BlackBerry subscribers shrank by four million to 72 million in the quarter, lengthening a drop that started late last year and shows no signs of stabilizing. RIM said it would no longer disclose subscriber numbers, dropping one of its most closely watched performance metrics.
RIM also reported a surprise quarterly net and operating loss, blaming lost revenue in Venezuela because of currency controls there. While it has long abandoned providing detailed financial forecasts, it said it expected another operating loss in the current quarter.
Amid the dismal results in its hardware business, Mr. Heins said RIM was seeing an uptick in corporate customers for its software services, which include new security and phone-management offerings. But despite calls from some analysts to split its hardware and software businesses, Mr. Heins said his strategy remained focused on offering both.
RIM increased its cash reserves slightly, to $3.1 billion, an important metric for gauging the company’s staying power. The company has essentially no debt, and has cut costs sharply, helping it conserve cash. But Mr. Heins has promised to increase spending to boost its rollout of new products and services, threatening that cushion in quarters to come. RIM has previously said it would spend some $1 billion related to the BlackBerry 10 launch, but hasn’t broken out specifics.
The current fiscal year would be a “year of investment,” he told investors on Friday’s conference call. Many analysts, however, questioned whether RIM has the time to spare.
“I can appreciate a long-term perspective, but right now in the smartphone space the product cycles are shortening, not lengthening, and the pressures are only going to intensify,” said Bill Kreher, an analyst at Edward Jones.
Indeed, even smartphone giants Apple and Samsung—which hold a commanding lead in smartphone market share and have billions of dollars more in cash than RIM—have disappointed on shipment numbers in recent quarters.
“If companies like that are unable to [build excitement] it makes me wonder if BlackBerry can ever retain its lost glory,” Mr. Kreher said.
This was the first full period to include sales from the first of three new BlackBerry 10 smartphones, the Z10. The keyboard-equipped Q10 went on sale in some markets in May and in the U.S. just this month. The less expensive Q5, destined for emerging markets, went on sale this month in Dubai.
Another bad sign for analysts was RIM’s declining services revenue in the quarter. Service revenue made up just 26% of total revenue, down from 36% the previous quarter. That revenue has buoyed RIM in the past amid falling BlackBerry shipments.
Overall, RIM said it lost $84 million, or 16 cents a share, narrower than the loss of $518 million, or 99 cents a share, that it recorded in the year-earlier first quarter. The company said revenue rose 9% from a year earlier, to $3.1 billion.
Write to Will Connors at [email protected]
The company’s shares tumbled 28% on Friday after RIM reported it shipped far fewer new BlackBerry phones than analysts had expected in its fiscal first quarter.
Chief Executive Thorsten Heins has staked the company’s future on a new operating system, BlackBerry 10, which it unveiled early this year, and a bevy of phones that run off it. Many investors have bet this turnaround plan could work, sending RIM’s shares up 59% in the 12 months before Friday’s news.
On Friday, RIM said it shipped 2.7 million new smartphones in its latest quarter, a fraction of what Apple Inc. sold in its latest period and about half the number sold by struggling rival Nokia Corp.
The disappointing numbers raise questions about whether RIM can gain steam in a market saturated by smartphones from Apple and Korea’s Samsung Electronics Co.
Rather than enjoy an initial burst of shipments, RIM is now forced to ratchet up spending to jump-start sales. On Friday, Mr. Heins defended the launch as “still in its early stages,” promising to increase spending over the next three quarters in rolling out new phones and services.
Investors retreated on Friday, sending shares down to $10.46, erasing more than $2 billion in market value.
The Z10 phone received generally positive reviews ahead of its February launch, and RIM initially said that device and a keyboard-equipped Q10 were selling well in many markets.
RIM said Friday it shipped 6.8 million BlackBerrys in its first quarter, which ended June 1, up from 6 million the previous quarter. But it said only 40% of those were Z10s or Q10s. That was at the bottom of a wide range of analyst forecasts.
RIM said its base of BlackBerry subscribers shrank by four million to 72 million in the quarter, lengthening a drop that started late last year and shows no signs of stabilizing. RIM said it would no longer disclose subscriber numbers, dropping one of its most closely watched performance metrics.
RIM also reported a surprise quarterly net and operating loss, blaming lost revenue in Venezuela because of currency controls there. While it has long abandoned providing detailed financial forecasts, it said it expected another operating loss in the current quarter.
Amid the dismal results in its hardware business, Mr. Heins said RIM was seeing an uptick in corporate customers for its software services, which include new security and phone-management offerings. But despite calls from some analysts to split its hardware and software businesses, Mr. Heins said his strategy remained focused on offering both.
RIM increased its cash reserves slightly, to $3.1 billion, an important metric for gauging the company’s staying power. The company has essentially no debt, and has cut costs sharply, helping it conserve cash. But Mr. Heins has promised to increase spending to boost its rollout of new products and services, threatening that cushion in quarters to come. RIM has previously said it would spend some $1 billion related to the BlackBerry 10 launch, but hasn’t broken out specifics.
The current fiscal year would be a “year of investment,” he told investors on Friday’s conference call. Many analysts, however, questioned whether RIM has the time to spare.
“I can appreciate a long-term perspective, but right now in the smartphone space the product cycles are shortening, not lengthening, and the pressures are only going to intensify,” said Bill Kreher, an analyst at Edward Jones.
Indeed, even smartphone giants Apple and Samsung—which hold a commanding lead in smartphone market share and have billions of dollars more in cash than RIM—have disappointed on shipment numbers in recent quarters.
“If companies like that are unable to [build excitement] it makes me wonder if BlackBerry can ever retain its lost glory,” Mr. Kreher said.
This was the first full period to include sales from the first of three new BlackBerry 10 smartphones, the Z10. The keyboard-equipped Q10 went on sale in some markets in May and in the U.S. just this month. The less expensive Q5, destined for emerging markets, went on sale this month in Dubai.
Another bad sign for analysts was RIM’s declining services revenue in the quarter. Service revenue made up just 26% of total revenue, down from 36% the previous quarter. That revenue has buoyed RIM in the past amid falling BlackBerry shipments.
Overall, RIM said it lost $84 million, or 16 cents a share, narrower than the loss of $518 million, or 99 cents a share, that it recorded in the year-earlier first quarter. The company said revenue rose 9% from a year earlier, to $3.1 billion.
Write to Will Connors at [email protected]