The headline number from BlackBerry smartphone maker Research in Motion Ltd. (NASDAQ: RIMM) first quarter earnings report was solid. EPS reached $1.38, higher than earnings estimates of $1.35. But revenue came in at $4.24 billion, lower than estimates of $4.35 billion, and other numbers also looked weak.
The company’s earnings report was nearly overshadowed by the release of the iPhone 4 from Apple Inc. (NASDAQ: AAPL) and the announcement of a new Droid X smartphone from Motorola Inc. (NYSE: MOT), based on the Android operating system from Google, Inc. (NASDAQ: GOOG).
RIM shipped 11.2 million BlackBerry smartphones in the quarter and gained 4.9 million new subscribers. Analysts were looking for shipments of 11.5 million units and 5 million subscribers. The shipments were a new record for RIM, but the number came in at the low end of the company’s earlier guidance. New subscribers represented a 60% increase from the same period a year ago, but again came in at the low end of guidance. RIM now claims 46 million subscribers. (Related Article: Could a BlackBerry Tablet Computer Compete With The iPad?)
The company’s co-CEO claims that RIM has “unprecedented campaigns and devices” ready to hit the marketplace to compete with iPhones and Android-based smartphones. RIM needs something like that. Apple, especially, has been making inroads into the company’s corporate subscriber base, which is where RIM has consistently been the market share leader.
For the second quarter, RIM expects revenues of $4.4-$4.46 billion and EPS of $1.33-$1.40. Analysts at Yahoo! Finance expect $4.5 billion in revenue and EPS of $1.30. RIM forecasts second quarter sales of 11.6-12.1 million units, and a new subscriber increase of 4.9-5.2 million.
RIM’s estimates are probably based on falling prices. The average selling price for a Blackberry in the first quarter was $300, down from $357 in the same period a year ago. Analysts had been expecting a price of $305.
To take some of the sting out of the lackluster report, RIM said that it would buy back and cancel up to 31 million shares of common stock. Altogether, the company could buy back 10% of its outstanding shares, or about 56 million shares. That’s about $3 billion. The company could manage that from its cash on hand of about $1.9 billion and its operating cash flow ($1.1 billion in the first quarter), but that is not going to stop the bleeding in average selling price or the stiffer competition from Apple, Motorola, and other smartphone makers. If the best idea a company can come up with to increase shareholder value is buying back stock, that is a sign that the company either needs new leadership or that it has accepted its fate.
RIM shares fell about 4% in after-hours trading last night. Shares are down nearly 6% in pre-open trading this morning, and are less than a dollar away from the 52-week low.
