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RIM (RIMM) -15.3% as trading resumes, after handing in guidance far short of expectations....
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Thursday, June 16, 2011, 4:56 PM ETRIM (RIMM) -15.3% as trading resumes, after handing in guidance far short of expectations. "Delays in new product introductions into the very late part of August [is] leading to a lower than expected outlook" in Q2. Also: Unit sales of 13.2M were below already reduced forecast for 13.5M-14.5M; launch of “a program to streamline operations... which will include a headcount reduction.”
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Basically, the game is over for RIMM and Nokia, in so far as their proprietary platforms go.
The difference to Nokia is that they are ahead on platform software development. Nokia is Research In Motion's (RIMM) main competition currently, because both companies sell a large percentage of their phones outside of the US market. Windows Phone might get a marketing boost, whereas RIMM needs carriers to provide marketing; they are the David amongst Goliaths.
I believe this is the third big tech firm to talk about headcount reductions. Ought to be good for employment growth.
1. share buyback is an inconsistent strategy to increasing r&d spend and laying off staff
2. COO medical leave a mystery: can they get someone with a strong background in retail to manage tablet sales?
3. My EPS 2012 estimate is consistent with what management provided. $5 ($4-6 given)
4. 2013 and 2014 forecast already includes drastic drop in earnings
5. How will staff reduction help company speed up development of mid- and high-end product? Are they going to cut support for the very old models (running OS 4.7x?) Why not run a promo of some sort to get unhappy users on at least the curve and OS 6?
Bottom line:
Just how much risk is there for execution of the new product roadmap? 2012 will see larger market share loss (given rate of growth of android/iphone). WP7/Nokia will also be released then. Mango looks great. The WP7 may even be competitive in the corporate space, though unlikely...but definitely in the consumer space.
Profit is still at 43% though projected to decline to 40% in following quarters, which is good though implies better sales in lower priced phones and rest of world (outside US) sales. Where they are not really addressing is the high end, which might impress reviewers and that small segment of phone buyers.
The staff layouts were expanded upon this week in that support for devices prior to BB 5 will be slowly discontinued, and much of the Java development team will see the reductions. That comes from another development company, so I'm not entirely certain of the accuracy of that, but it sounds like the right thing to do.
So far only HTC are really generating profits from Android, despite that it is becoming the dominant smart phone platform. There is the marketing power of Google behind that. Windows Phone 7 will have the marketing power of MicroSoft behind it, without much need for Nokia to do much more, though as I understood that Nokia is not getting an exclusive on the software. That leaves only Apple with iOS and Research in Motion with QNX as in-house software and hardware development. Basically RIMM copies AAPL, but lacks the marketing power. RIMM will never have the number one spot in market share, but as other profitable companies prove, being at the very top is not necessary for profits. RIMM should continue to do better than many phone manufacturers, just not Apple, but they need to finish the changes they started.
I think people still do not understand that you can not sell crappy products with great marketing!