Phone
RIM slid as much as 12 percent to $72.96 in late trading yesterday after the Waterloo, Ontario-based company said revenue this quarter will be $3.6 billion to $3.85 billion. Analysts on average estimated sales of $3.91 billion.
The company has cut prices of some products as it prepares to release new BlackBerrys later this quarter, co-Chief Executive Officer Jim Balsillie said yesterday on a conference call. RIM is up against rival devices from Apple and Palm Inc., both of which have lowered prices in the past few months, and a raft of planned phones based on Google Inc.s Android software.
“If you want to go mainstream, you have to be competitive with the market and lower prices,” said Steven Li, an analyst at Raymond James Ltd. in Toronto. He has an “outperform” rating on the stock. “Its clearly the lower average selling price that drove the sales miss.”
Higher-priced new versions of the BlackBerry Storm and Bold arent going to come until later this quarter, which ends Nov. 28, so that wont help average selling prices much in the period, Li said. Cupertino, California-based Apple cut the price of its older iPhone 3G in half to $99 in July. Sunnyvale, California-based Palm, which released its Pre phone in June, reduced the price $50 this month to $149.99 and said it plans to introduce a cheaper device later this year.
The BlackBerry Curve 8520, among the lower-priced products in RIMs smart-phone portfolio, is available at Wal-Mart Stores Inc. for $48.88 with a two-year service contract with T-Mobile USA Inc.
Sales Driver
“Gross sales are really what is going to drive these stocks forward,” said Michael Yoshikami, chief investment strategist at YCMNet Advisors, which manages about $850 million in Walnut Creek, California. “You simply cannot just continue to get efficient, you have to grow your business, and thats clearly what RIM missed on,” he told Bloomberg Television.
RIM fell $2.71, or 3.2 percent, to $83.06 New York time yesterday in regular Nasdaq Stock Market trading. The shares have doubled this year.
The companys third-quarter earnings forecast of $1 to $1.08 a share missed some estimates as costs rose to develop and market new devices. Analysts on average predicted $1.06 a share.
“When expectations ramp up as they have with RIM, thats a disappointment,” said Matt Thornton, an analyst at Avian Securities LLC in Boston, who rates the stock “positive.”
Research and development costs in the second quarter jumped 30 percent to $235.6 million, while sales and marketing expenses rose 13 percent to $429.7 million, RIM said in a statement.
Net income in the period ended Aug. 29 dropped 4 percent to $475.6 million, or 83 cents a share, from $495.5 million, or 86 cents, a year earlier, RIM said. Sales rose 37 percent to $3.53 billion, missing the average $3.63 billion estimate of analysts.
The average selling price for the third quarter will be about $320, Balsillie said. The price was about $345 in the second quarter, Chief Accounting Officer Brian Bidulka said on yesterdays call. Both were below the first quarters $357.
The decline can be partly explained by the popularity of the cheaper BlackBerry Curve 8520, Balsillie said.
“Our goal is to get more and more mainstream and get more and more volume,” Balsillie said. “This is kind of a land grab.”
Phone Shipments
RIM shipped 8.3 million devices last quarter and added 3.8 million net new subscribers. Mike Abramsky, an analyst at RBC Capital Markets in Toronto, predicted RIM would ship 8.7 million devices and gain 4.1 million subscribers.
Apple, based in Cupertino, California, sold 5.2 million iPhones last quarter.