Earnings Preview: Research in Motion

Research in Motion (RIMM) is expected to report Q1 earnings after the market close on Thursday, June 18, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 94c for EPS and $3.41B for revenue, according to First Call. Management provided better than expected guidance management on their last earnings call for Q1 EPS of 88c to 97c on revenue of $3.3B to $3.5B.

Analyst Views

Deutsche Bank expects RIM to ship 7.88M units with gross margins of 43%, and RIM’s average selling price is expected to be $350. On June 15, Canaccord downgraded RIM to Hold from Buy on account of the recent share price appreciation, lofty expectations for management’s August guidance and an incrementally bearish outlook on the consumer spending front. Despite the downgrade,

Canaccord raised its August quarter projections to 9M shipments from 8.3M, causing its sales and EPS estimates to grow to $3.83B and $1.17. Feedback from the channel remains positive. Additionally, Canaccord expects carriers to remain aggressive with smartphone promotions. Finally, RIM's new device launches over the summer should further support Canaccord's new forecast. Thomas Weisel expects RIM to report a solid May quarter, with possible modest upside to its revenue and EPS estimates of $3.4B and 94c. The firm believes device shipments were driven by continued uptake of existing Bold and Storm models with surprisingly continued strength in both legacy Curve and Curve 8900 shipments.

On the crucial gross margin front, Weisel's estimate of 43.4% is at the midpoint of the company's guidance. Weisel believes RIM's August quarter guidance will be generally in-line with its revenue and EPS estimates of $3.7B and 97c estimates. The model conservatively reflects flat quarter-over-quarter subscriber growth and modestly higher replacement demand, driven by the Tour at Verizon (VZ). Bottom-line: Most analysts expect strong financials, but questions remain about the company’s ability to fend off rivals without sacrificing profit margins.

Comments

[JamesApple:]

the flattening of shipments and profit margins at a time when early reports of healthy growth of Palm and Apple shipments, release of the $99 iPhone and next generation products of lower priced and more sophisticated advanced products from Palm, Samsung, LG, HTC and Nokia point to the conclusion this may be the last positive Rim quarterly report for the coming quarters.

Jun 18 01:30 PM