Research In Motion Ltd (BBRY) Misses All Three Key Metrics: MS

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Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) missed all 3 of the key metrics we highlighted in our preview notes a new report from Ehud Gelblum, PhD og Morgan Stanley: BB10 unit shipments, Gross Margin and Service revenue/subscriber count, implying a material lack of traction for the new OS. Ehud fears consumer opinion, and thereby enterprise adoption, of BB10 could have been materially harmed by today’s earnings, given the falling stock price and negative buzz that will undoubtedly follow in the media and online, leading Morgan Stanley to put their estimates under review as they learn more. Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) was down 27 percent on the earnings results, further details from Morgan Stanley below.

Research In Motion Ltd (BBRY) Misses All Three Key Metrics: MS

Research In Motion (BBRY) BB10 Shipments

Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)’s BB10 shipments were worse than we expected at 2.7M, below our 3.5M est. Momentum also slowed dramatically from FQ4 when 1M BB10 devices shipped with only one device, the Z10, avail for one month in a few markets, vs. 3 full months of Z10 across many markets and 1 month of Q10 in a few markets. We believe BB10 shipment run-rate should have been much higher, especially since build plans have remained mostly stable, and indicate production of roughly ~5M devices in the May quarter, suggesting to us that sell-through is below expectations. With a 47% q/q or $284M increase in inventory to $887M, ~1M devices appear to be sitting on the balance sheet.

BlackBerry (BBRY)’s Service Revenue

We calculated hardware GM increased just ~100 bps q/q to ~13-14%, well below our 21% est on the lower BB10s. Service revenue wasn’t bad after adjusting for an issue with getting US$ out of Venezeula, just missing our est. on an adj basis, down  9% q/q vs. our 6% est.

The Fall Of Blackberry (BBRY) Subscribers

However subscribers fell 4M q/q to 72M, accelerating from a 3M decline in FQ4 and below our 3M est. Even worse, management is again not planning to disclose monthly subs, limiting visibility. We were equally concerned Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)’s CEO Heins would not discuss Q10 sales, but instead stated “ it’s too early to say how it will be doing. But, we see strong demand. We see a good reception of the device, and we’ll see how it does in those selected markets where we are pushing it.,” implying shipments could be off to a slow start.

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