RIM Shares Jump 19% on Better Than Expected Earnings

Updated on

Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM), the troubled Blackberry maker, just reported some better than expected earnings for the second fiscal quarter.

RIM Shares Jump 19% on Better Than Expected Earnings

BlackBerry subscriber base increased to approximately 80 million globally
• Cash increased by approximately $100 million to $2.3 billion at the end of q2
• Cash flow from operations was $432 million in Q2
• Revenue came in at $2.9 billion in Q2, a 2% increase from $2.8 billion in Q1
• Net loss in Q2 of $235 million, or $0.45 per share diluted,of $0.27 per share diluted compared to analysts estimates of  $0.47 .

Shares are currently up 19% in after-market trading on the news.

For the six months ended 27 August 2011, Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM)’s revenues increased 2% to $9.08B. Net income decreased 35% to $1.02B. Revenue reflects an increase in income due to increase in sales of the company. Net income was offset by decrease in gross profit margin, higher selling, marketing & administration expenses. The Company is a world leader in the mobile communication market.

The company’s largest shareholder is Prem Watsa’s Fairfax Financial Holdings Limited (TSE:FFH). The ‘Warren Buffett of Canada’, which Prem Watsa is sometimes referred to, owns over 10% of RIMM shares. Watsa’s Fairfax almost 70 million richer at the moment.

Investors had (and many continue to have) a dim view of Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM)’s outlook. Below are some of the key metrics, which investors were looking for.

Subs/Net Adds

CEO Thorstein Heins reported during a developers key note on Tuesday that BlackBerry subscribers grew to 80 million in 2Q. This is about 2.3 million better than consensus estimate. That said, analysts believe ARPU is taking a bigger hit.


RIM’s ability to wisely manage cash will be in focus. Investors believe RIM needs to do a better job of managing working capital. They still have not seen any signs that CEO Heins has curtailed the capex and acquisition spending of his predecessors. Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM)’s cash and cash equivalents were up $100 million.

Many are hoping to get an update on the service outage RIM had last week in EMEA. While the outage was only a couple of hours and it had an impact on only 6% of users, RIM clearly still has issues with its ability to deliver uninterrupted service. BMO Capital Markets views this as a big issue since ‘we think all of the company’s value is in its ability to leverage the NOC and relay architecture.’ RIM CEO HEINS SAYS LAST WEEK’S EUROPE SERVICE DISRUPTION WAS NOT AN “OUTAGE”; ALL MESSAGES GOT DELIVERED
Cost reduction

 RIM’s progress on its cost reduction efforts will also be of interest.RIM plans to remove $1B in costs by end of FY2013 compared with the 4QFY12 run rate. Investors believe RIM’s cost structure remains bloated.
BlackBerry 10.

RIM demonstrated the latest build of BB10 and said carriers are interested. Many believe RIM still has a long way to go with BB10. RIM needs to unveil production hardware as well as provide more updates on carrier commitments and release dates.  Apps remain a critical issue for RIM. RIM announced some key core third party apps on Tuesday, but  they still have significant work to do before consumers will be interested. The CEO stated on the conference ‘RIM CEO THORSTEN HEINS SAYS DISPLAY IN FULL TOUCHSCREEN BLACKBERRY 10 DEVICE EXCEEDS THAT OF APPLE’S IPHONE 5

Disclosure: No position

Leave a Comment