Tuesday, March 22, 2011

Research In Motion (NASDAQ: RIMM): Q4 Earnings Preview 2011

Research In Motion Limited (NASDAQ: RIMM) is scheduled to release its fourth quarter earnings after the closing bell on Thursday, March 24, 2011. Analysts, on average, expect the company to report earnings of $1.75 per share on revenue of $5.63 billion. In the year ago quarter, the company reported earnings of $1.27 per share on revenue of $4.08 billion.

Research In Motion Limited is a leading designer, manufacturer, and marketer of wireless smart phone and related services. RIM generates most of its revenues through the sale to carriers of its wildly popular BlackBerry smart phone, which has become a common choice for corporate customers around the world. 

In the preceding third quarter, the Waterloo, Ontario-based company's net income was $911.1 million or $1.74 per share, compared to $628.4 million or $1.10 per share in the year-ago quarter. Revenue grew 40% to $5.49 billion from US$3.92 billion in the same quarter of last year. Analysts, on average, expected the company to report earnings of $1.64 per share on revenue of $5.40 billion..

At its last earnings call in December, the company said that it expects fourth-quarter  earnings of $1.74 to $1.80 per share, and revenue of $5.5 billion to $5.7 billion. Gross margin percentage for the fourth quarter is expected to be similar to third quarter levels. 

The company's market share is shrinking amid increased competition from Apple’s iPhone and devices that use Google Inc.’s Android software. Investors will be closely watching smartphone shipments and subscriber growth for the quarter. Marvell Technology (NASDAQ: MRVL), which makes semiconductors for RIM devices, recently reported soft business and that it may continue for awhile. This could be a signal that RIM may be seeing erosion in its revenue.

The company is now trying to to reinvigorate itself and match the momentum of rival mobile giants Apple and Google. Last year, the Canadian smartphone maker launched the BlackBerry PlayBook, its first tablet computer. According to analysts, RIM could leverage its established presence in the enterprise market to lift its tablet sales. The company is the latest entrant to the tablet computer market and is expected to pose direct competition to Apple Inc.'s (NASDAQ: AAPL) iPad. RIM recently announced that the BlackBerry PlayBook tablet will be sold starting April 19 from all Best Buy (BBY) stores and Best Buy Mobile stores in the U.S.

RIM also recently announced a cloud-based data storage partnership with the world’s largest software vendor, Microsoft Corp. (NASDAQ: MSFT). RIM will use Microsoft servers and software to provide cloud-based storage solutions for clients, as more of them shift their data to the cloud.

RIM is also relying on emerging markets for revenue growth as competition from Apple and Google Inc.’s Android cut into its U.S. sales. During RIM's fiscal Q3 ended November 27, BlackBerry was the number one smartphone in Western Europe and the UK, and number one smartphone in Latin America for the third consecutive quarter.

The company's stock currently trades at a forward P/E (fye Feb 27, 2012) of 9.21 and PEG Ratio (5 yr expected) of 0.46. In terms of stock performance, RIM shares are down nearly 19% over the past year.

Full Disclosure: None.
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