I saw something today (4/29) that I have not seen in quite some time. Peter Misek, analyst at Jeffries and Company said the two words that I have been wanting to here from the analyst community for the past two decades; he simply said the words "we were wrong."
If he were sitting across the table from me, I would remove my cap and extend to him a gentleman's handshake because this is not something we will likely see again. I bring this up for two reasons. First, in an article written several weeks ago, I told readers about my distain for stock analyst for precisely not demonstrating the level of accountability as Mr. Misek just displayed.
The second reason I wanted to address this topic is in an effort to be accountable for my own projections. Two weeks ago, not only did I write an article praising Research In Motion (RIMM) in spite of what was (at the time) a meek outlook on its guidance, my bullish call was on the heels of poor reviews on the release of its PlayBook tablet.
On April 15, I said …
In spite of the cold reviews, I still see growth opportunities for the company now that the PlayBook is set to launch. The Blackberry product is what placed RIMM on the map and made it relevant. Some of the highlights from last year's sales show that it is far from being done, either as a company or as a growth stock. A couple of things to note from its recent quarterly release:
- Record BlackBerry smart phone shipments of 52.3 million grew 43% over fiscal 2010.
- Fiscal 2011 revenue grew 33% over fiscal 2010 to $19.9 billion, and earnings per share grew 47% over the prior fiscal year to $6.34 per diluted share.
- BlackBerry was the number one selling smart phone brand in the U.S., Canada, Latin America and the U.K. for calendar 2010.
Today, I would like to humbly say, I was wrong. Like Mr. Misek, I had cause to be optimistic, but it's never wise to expect more from a company than the company itself is willing to project. RIMM just warned that it would see lower-than-expected shipments of smartphones and a shift to lower-priced devices. What I found to be pretty odd was that during the announcement, the CEO, Jim Balsille, said he remains upbeat about RIM's outlook. He was quoted as saying: "We have this company straight in the middle of the whole tablet mobile computing space." Really?
To make matters appear bleaker, the warning came at the same time rival, Motorola, reported surging sales of new smartphones built on Google Inc.'s Android software. In fact, Motorola said its revenue from mobile devices jumped 30% to $2.1 billion in the March quarter. The company also said it shipped 4.1 million smartphones which was up from 2.3 million a year earlier as well as 250,000 of its Xoom tablets, which debuted just this February.
For the quarter ending in May, RIM said it now expects per-share earnings of $1.30 to $1.37, down from the $1.47 to $1.55 projected last month. RIM also said it expects shipments of BlackBerry phones for the quarter to be at the lower end of the range of 13.5 million to 14.5 million it forecast in March. The company said the lower shipments and a shift to lower-priced models will result in revenue slightly below the $5.2 billion to $5.6 billion estimated forecast in late March.
In light of the above, Peter Misek cut his rating to "underperform" from "buy." Obviously, I would have to agree with that sentiment. I don't see how investors can have confidence in how management will be able to execute when it will admittedly have difficulty producing and moving its flagship product.
There is obvious cause for concern if you are a RIMM shareholder. The signs are now written on the wall in various languages that the loss for market share is all but certain at this point and it's mounting with global share reportedly dropping closer to 36% from about 40%. It is also becoming clear that the hardware is now sub-par when compared to Apple's Iphone, the new Motorola (MOT) phones running the popular Android OS.
The Blackberry torch has clearly been passed on to the competition and sadly, it's starting to look like a foregone conclusion that the winners will mostly be Apple (NASDAQ:AAPL), Motorola and Google (NASDAQ:GOOG). They are now moving forward while stepping over what appears to be the remains of RIMM.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.