by Brad Moon | September 28, 2012 12:10 pm
There hasn’t been a whole lot of good news for beleaguered smartphone manufacturer Research In Motion (NASDAQ:RIMM) this year.
I say smartphone, because even though it also makes a tablet — the PlayBook — you’re likely to find that gathering dust on a discount rack. Losses from the tablet have been one part of the story, along with layoffs, dwindling market share, missteps, management upheaval and most important, the repeated delay of new handsets sporting the new BB10 operating system.
The company’s stock shed 50% of its value this year. However, it was up 6% after unexpected news of increased subscribers earlier this week, but most analysts were betting that yesterday’s earnings report would be grim enough to take the shine off the good news. Instead, RIMM shares were up 19% at one point in after-hours trading, hitting $8.50.
The company reported a loss of $235 million, or 45 cents per share. So, where’s the good news for investors?
To understand the sudden vote of confidence in RIMM, one has to look at the picture a few weeks ago compared to today. At the start of the month, all anyone could think about was the looming launch of Apple’s (NASDAQ:AAPL) iPhone 5. RIMM was all but invisible.
Its delayed BB10 smartphones seemed like vaporware, it had come off a disastrous quarter where it lost over $500 million and when the company did finally make headlines it was because Yahoo (NASDAQ:YHOO) publicly declared the platform irrelevant by offering employees free iPhones, Android phones or Windows Phone 8 devices while phasing out all support for BlackBerry.
Now, look at the past week. RIMM has been conducting BlackBerry Jam sessions worldwide in an attempt to boost developer confidence. Sept. 25 marked the start of a critical U.S. session, one where CEO Thorsten Heins took the stage in a keynote address intended to pump up U.S. developers, while sending a positive message to the attending tech media.
Heins demoed a new BB10 smartphone, showing a device that seems solid, an operating system that’s real and some apps that people want, such as a native Facebook (NASDAQ:FB) app. Heins also announced the new phones should be released in January 2013, with carriers getting the devices to begin testing and certification starting in October.
Next up, the good news that BlackBerry subscribers are actually up by 2 million, not down as had been expected. This was a very important piece of information. RIMM had 78 million subscribers, and the feeling was that it was going to report a decline. Its market share has continued to steadily erode — which isn’t good — but if its subscriber base had also shrunk, that would be terrible. It would mean that its entrenched customers were also giving up and switching, which would signal a certain death spiral.
That core customer base is the group that will be snapping up BB10 devices next year after holding out on new hardware for years. Any increases in that base means more BB10 buyers. With the surge of sales in January as subscribers upgrade their smartphones, RIMM may see a “halo” effect where net new customers buy a BlackBerry. That’s exactly what it needs to halt the slide in market share.
The result of the positive press was that impressive 6% surge in RIMM’s stock.
However, RIMM’s earnings report on Thursday had every sign of wiping out those gains. What the company delivered was bad, but better than the previous quarter — and better than analysts had predicted.
Revenue of $2.9 billion was up 2% from the previous quarter (although down 31% year-over-year), the company sold more BlackBerrys than anyone thought it would (7.4 million compared to estimates of 6.9 million) and rather than digging further into its cash reserves, RIMM boosted them by $100 million to $2.3 billion.
It turns out that people are still buying the old BlackBerrys, RIMM’s fiscal belt-tightening seems to be working (it still has another 2,000 layoffs to go), enterprise defections from the platform appear to be on hold for now and it’s not burning through cash as had been feared.
Not all the RIMM news was good. The company had to address concerns about a network outage and the idea to film a cringeworthy music video where RIMM employees serenade developers went viral — in a bad way. But overall, it was one of the better weeks RIMM has had in many months.
No one is saying RIMM is set to claw its way back into the mainstream with these developments, but it no longer seems terminal. Its situation has stabilized somewhat, and its future plans seem real and attainable. Despite the losses, that appears to be good enough news to send RIMM’s stock price climbing.
As of this writing, Brad Moon didn’t own any securities mentioned here.
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