RIM returns to a profit on new Blackberry sales
Covering new technology and the companies behind them is one of the better parts of being a business reporter. Who doesn’t want to go to the conferences where Apple, Samsung, or Nokia show us the latest gadget that we simply can’t do without and will make our lives so much better?
One of the better earnings stories is that of Blackberry maker Research in Motion. It has been struggling to make a profit as customers and business clients turned to smart phones from other makers, upending its long-time hold on the market.
Here’s Thursday’s story from the Wall Street Journal, which chose to focus on some of the board changes toward the top:
Research In Motion Ltd. reported a surprise profit Thursday and a comfortable cash pile for its fiscal fourth quarter, bolstered by the first sales of its new BlackBerry Z10 device.
Underscoring still-formidable challenges, RIM also said it lost about three million subscribers in the period. And Chief Executive Thorsten Heins said he expected to see service fees decline as RIM works through a transition with carriers over those payments.
RIM also said one of its founder and its former, long-time co-chief executive, Mike Lazaridis, would step down from the board. That ends Mr. Lazaridis’ formal ties to RIM, which go back about 30 years to when he started the company with a loan from his parents. Mr. Lazaridis said, however, he had no plans to sell down his sizeable RIM holdings, which amounts to about 5.7% of the company’s shares.
The results were encouraging for many investors, who bid up shares. In late morning trading in New York, RIM was up 46 cents, or 3.2%, to $15.03. The quarterly profit, RIM’s second, consecutive profitable period, comes a little over a year after Mr. Heins took the reins from Mr. Lazaridis and Co-Chief Executive Jim Balsillie.
The New York Times took a more traditional earnings story approach, putting the company’s full year losses in the second paragraph:
The annual loss, which tax benefits reduced from an operating loss of $1.2 billion, compared with $1.16 billion in net earnings a year earlier.
In the latest quarter, which ended March 2, the company lost $18 million from operations. But recovery of income taxes transformed that into a $98 million profit for the quarter, or 19 cents a share.
BlackBerry has struggled with declining sales. Revenue in the latest quarter was $2.6 billion, compared with $2.7 billion in the same period a year ago. Annual revenue fell to $11 billion, from $18.4 billion a year earlier.
For about one month of the quarter, the first of its new phones, the BlackBerry Z10, was on sale in Canada, Britain and some other markets, but not the United States. BlackBerry said that it shipped about a million of the handsets during that time.
It nevertheless reported that there were 76 million BlackBerry subscribers worldwide at the end of the period, a loss of about three million users. Until the third quarter of the fiscal year, BlackBerry, formerly known as Research in Motion, had consistently increased the number of subscribers.
While the decline in subscribers is troubling, investors seemed to focus more on the company’s return to the black. But the Associated Press pointed out that one good quarter didn’t meant the company was back where it should be:
It will take several quarters, though, to know whether RIM is on a path toward a successful turnaround. RIM just entered the crucial U.S. market with the new phone last week. And despite selling a million BlackBerry 10 phones in other countries, RIM lost subscribers for the second consecutive quarter.
Thursday’s earnings report provided a first glimpse of how the BlackBerry 10 system, widely seen as crucial to the company’s future, is selling internationally and in Canada since its debut Jan. 31. The 1 million new touch-screen BlackBerry Z10 phones were above the 915,000 that analysts had been expecting for the quarter that ended March 2. Details on U.S. sales are not part of the fiscal fourth quarter’s financial results because the Z10 wasn’t available there after the quarter ended.
Investors appeared happy with the financial results. RIM’s stock rose 34 cents, or 2.4 percent, to $14.91 in afternoon trading Thursday after the release of results. Many analysts had written RIM off last year, but now believe the Canadian company has a future.
“I thought they were dead. This is a huge turnaround,” Jefferies analyst Peter Misek said from New York.
Misek said the Canadian company “demolished” the numbers, especially its gross margins. RIM reported gross margins of 40 percent, up from 34 percent a year earlier. The company credited higher average selling prices and higher margins for devices.
“This is a really, really good result,” Misek said. “It’s off to a good start.”
While coverage was mostly favorable, I appreciated the fact that reporters injected some skepticism up high in all the stories to question the results and the company’s ability to repeat it going forward. Obviously we’ll have to wait and see, but the coverage of Thursday’s earnings remains a good example to those just joining the tech beat.