Thursday, June 16, 2011

The Biggest Silver Lining in RIM's Q1 Results

RIM's results for the 1st quarter was mixed, and guidance for the 2nd quarter was ugly, but there are several silver linings, with the PlayBook being the biggest one.  EPS in the quarter was $1.33 (beating consensus of $1.32) though revenue was $4.9 billion (missing consensus of $5.15 billion).  However, EPS for 2Q is now expected to be $0.75-$1.05 (lower than consensus of $1.40) and revenue is expected to be $4.2-$4.8 billion (lower than the $5.46 billion expected).  Full year guidance was reduced from the previous $7.50 to $5.25-$6.

There were several silver linings from the conference call.  Co-CEOs Jim Balsille and Mike Lazaridis both attending the conference call was a good effort to sooth investors.  Gross margins for the quarter was also better than expected, at $43.9%.

"Biggest BlackBerry Launch in History"
It was also announced that the Bold 9900/9930 will be launching in late August, earlier than the September that was widely rumoured.  Jim Balsille also said that RIM is having the "biggest BlackBerry launch in history" with certification being conducted at 23 carriers right now.  It was hinted that OS 7 devices will be launching quickly one after another, especially since they use the same OS, which speeds up certification.  Thus, while Q1 and Q2 earnings are rough, investors can expect to receive a boost in Q3 and Q4 from what is believed to be 4 BlackBerry launches (Bold 9900/9930, Torch 9850/9860, new Curve and Curve Touch).

PlayBook The Biggest Silver Lining

The biggest silver lining was PlayBook sales.  RIM recorded sell-in of 500,000 PlayBooks in Q1, beating consensus of 350,000.  PlayBook sales in Q1 was from April 19 to May 28.  Thus, at this rate, RIM is on pace to sell 4 million PlayBooks in calendar 2011.  Of course, RIM is launching many services for the PlayBook in the summer, including native email, Android Apps Player, BlackBerry OS Apps Player and Native SDK.  3 4G versions of the PlayBook (LTE, HSPA+ and Wi-Max) are also launching in the Fall.  Thus, PlayBook sales will only ramp higher in the months ahead, which means that RIM will sell more than 4 million PlayBooks.  I expect PlayBook sales to reach 6 million to 8 million in calendar 2011.     

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