RIM in the red again

As expected, Research In Motion recorded another quarter in the red, losing $114 million in its fiscal third quarter ending ended Dec. 1 as buyers hold off until the release of the new BlackBerry 10 platform next month.

Revenue was $2.7 billion during the three-month period, the company reported Thursday, down five per cent from the previous quarter and down a whopping 57 per cent from the same period a year ago when revenue was $5.2 billion for the quarter.

During the Q3 quarter RIM shipped 6.9 million BlackBerrys, down from the 7.4 million it shipped in the second quarter of this fiscal year.

On the other hand it shipped about 255,000 Playbook tablets, up from 130,000 the period before — although many of those tablets were heavily discounted. It also managed to increase cash from the previous quarter to $2.9 billion, which it will need to help market BB10. And the net loss for the quarter of $114 million wasn’t as bad as the $142 million it lost in Q2. Subscribers dropped to 79 million in the quarter from 80 million in Q2. From the point of view of cash, revenue and subscribers, RIM is treading water.
The company said thanks to cost cutting and layoffs, it achieved its target of saving $1 billion in the current fiscal year three months ahead of schedule. But it still expects to have another operating loss in the fourth quarter.
But enterprise telecom managers will be wondering about news that came out during a conference call between RIM executives and financial analysts that the company will change the number of services and fees it charges organizations using the upcoming BlackBerry Enterprise Service 10, its mobile management platform for BlackBerry and other mobile operating systems. BES 10, run across RIM’s private network, is expected to launch in May.

Heins didn’t offer details, but said a “menu” of offerings will be available, possibly by industry, with fees based on network usage levels as well as new “value-added” services. One goal, he said, is pulling in new revenue for RIM. “We plan to offer a range of security, mobile device and application management services, in addition to communication services,” he said. We will position BlackBerry Enterprise Service as the leading cross-platform enterprise mobile decide management service,” he said.

Corporate subscribers will have the option of not taking up premium service, and they will generate either less revenue to RIM than they do now, Heins said, or none at all.

The transition to the new model will take a year, he said.

Among the advantages, he said, is that it will allow application developers and other partners access to a broader number of subscribers.

RIM continued to execute on its product roadmap plans and to deliver on key financial metrics as it gets set for the global launch of BlackBerry 10,” Heins said in a statement as the quarterly financials were released.

“During the third quarter, we continued to demonstrate our strong financial position, generating $950 million in cash flow from operations, and increasing our cash position significantly to more than $2.9 billion. More than 150 carriers are currently completing technical acceptance programs for the first BlackBerry 10 products, and beta trials of BlackBerry Enterprise Service 10 are underway at more than 120 enterprises including 64 Fortune 500 companies.

“We believe the company has stabilized and will turn the corner in the next year.”
Looking ahead to the BB10 launch, Heins vowed an “amazing” debut including showing off features and “more surprises” that haven’t been revealed yet. He said 120 organizations, including 64 Fortune 500 companies, are doing beta testing on the new platform, and over 150 carriers have begun certifying their nertworks for BB10.
RIM is scheduled to reveal the production model of BB10 with a virtual keyboard on Jan. 30. Customers will be able to put their hands on one soon after, he said. Kris Thompson of National Bank Financial reported that date will be Feb. 5, with a BB10 device with a physical keyboard out early in March.
Financial analysts were impressed with the costs savings RIM has managed to wring out, but some remained doubtful the company can survive an an independent entity.
For example, Michael Walkley of Canaccord Genuity believes strong BB10 sales are critical for RIM to return to profitability. However, while he predicts BB10 sales of 1.8 million in the quarter after it launches and 3.8 million in the quarter after that (roughly March to May 2013), sales will drop off after that.
“While we do anticipate a sizable portion of RIM’s enterprise base will upgrade to BlackBerry 10 within the first several
quarters post the launch, we do not believe these upgrades will generate sales volumes necessary to return RIM to profitability considering the upgrade of RIM’s entire enterprise base (of 18 million) would represent less than half of the smartphones we forecast Apple or Samsung to sell in the December quarter,” he wrote late Thursday in a note to investors.
Nor, he added, does Canaccord believe BB10 will result in sustainable sales to consumers. In short, he believes Apple’s iPhone and various Android phones have too great a lead. Consumes have little interest in a third mobile platform, Walkley argues, and if one emerges it’s more likely to be around Windows Phone than BlackBerry.
In 2009 RIM [TSX: RIM] held 20 per cent of the smart phone market. It now holds an estimated three per cent.
On the other hand Thompson has revised his estimates of BB10 sales to 3.5 million from 1.2 million in the quarter after it launches, growing to 5-6.5 million a quarter after that. Overall BlackBerry shipments will hit 35 million for the 2014 fiscal year (March 2013 to February 2014), which would give it 4.5 per cent of the market.

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