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Second quarter results at RIM not good

by on26 September 2008

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Shares drop after announcement

It would seem that people didn’t have much good to hear in the second quarter earnings announcement from RIM today. The maker of the BlackBerry who we have been tracking very closely as of late, has investors worried about shrinking profits.

RIM posted an 88 percent jump in revenue, along with a 72 percent increase in net income over the same period last year. These numbers were in line with estimates and guidance that the company provided, but a bit lower than what analysts had expected. The drop in the company’s stock was almost 20 percent in after hours trading following the announcement.

The drop in RIM’s shares had more to do with the fact that the company’s gross margins are going to be lower for the next couple of quarters than expected as the company rolls out a slate of new products, including the BlackBerry Bold, BlackBerry Pearl Flip, andfthe BlackBerry Storm. The change in the margins has more to do with the fact that the BlackBerry maker is now building more expensive units in large volumes and they are simply more expensive.

RIM’s co-CEO Jim Balsille did not seem to be very worried about the transition to smarter and more sophisticated phones. Pricing on these phones is a big factor on their adoption rate and RIM needs to make sure than they are positioned to be a player in the market space for the long term, which means that they need aggressive pricing and attractive ful-featured models to compete.

To be successful RIM needs to continue to expand beyond the corporate market space into the territory where the iPhone has been very successful and they believe that with their new and upcoming products they are well positioned to do that.

The company shipped more than 6.1 million units, but many analysts expected more and some continue to suggest that RIM is losing some market share to the iPhone, but the company is hopeful that the launch of their first touch screen device which is known as the Storm will help recapture some market share, while at the same time satisfy some customers who have been waiting for something different to adopt since their carrier does not offer the iPhone.

Last modified on 26 September 2008
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