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RIM Delays BB OS10 Phones

12/16/2011 11:27:49 AM Eastern
Waterloo, Ontario - Research In Motion (RIM) cited chip delays in pushing back shipments of smartphones using the new BlackBerry 10 OS until the latter part of calendar 2012.

In the meantime, the company will embark on an aggressive advertising and promotion campaign in the U.S. and other select countries to boost lower than expected sales of phones based on its current BB7 OS.

The company, however, is on track for February availability of its PlayBook 2.0 tablet OS, which adds native BlackBerry email, contacts and calendar apps as well as ability to play back Android apps.

The smartphone advertising and promotion campaign is "imminent," one executive said, and it will promote the value proposition of BB7 OS products through advertising as well as "special offers." Executives called the BB7 OS, introduced earlier this year after a delay, as greatly advanced over the previous OS, adding such features as faster web browsing and an "ultra-responsive touchscreen."

Smartphones sales of 14.1 million units for the third quarter ending Nov. 26 were below expectations, the company admitted, and shipments will drop in the current quarter ending March 3, 2012, to 11 to 12 million phones because of inventory buildup in sales channels.

The ad campaign will accelerate sales of the BB 7 products as well as lay the groundwork for the BB 10 launch, executives said.

The BB 10 launch, however, has been delayed until the "latter part" of 2012, said co-CEO Jim Balsillie, because the highly integrated chipset that the smartphones will use won't be in production until mid 2012. The chipset is being delayed because RIM wants a chipset that will deliver an aggressive industrial design as well as lower power consumption and higher power efficiency for use on 4G LTE networks, he said.

The BB 10 OS on the smartphones is a converged OS that also runs on the company's tablet.

Meantime, the company announced a comprehensive review of all aspects of its business to improve its sales and financial performance. The review will include product management, manufacturing, the number of SKUs brought to market, supply-chain efficiency, and R&D, but the review is not designed to reduce head counts, which have already been reduced. The effort will also look into licensing opportunities and opportunities to leverage BlackBerry infrastructure.

Investors might feel the company has "fallen short" in financial performance and execution, said Balsillie, but he noted the company remains profitable and grew its subscriber base 35 percent year-over-year to 75 million for the fiscal third quarter ending Nov. 26. Outside North America, hardware revenues rose 56 percent, he noted.

Regarding PlayBook sales, the company said recent PlayBook promotions have worked out most of the PlayBook inventory in the channel, but the company expects to continue running promotions on the PlayBook because of market competitiveness in consumer and enterprise channels.

For the third quarter of RIM's fiscal 2012 year, revenues fell 6 percent year-over-year to $5.2 billion, and net income fell 71 percent to $265 million. About two-thirds of the $646 million drop in net income was attributable to a $356 million after-tax write-down of PlayBook inventory, $40 million after-tax charge due to a third-quarter service interruption, and $6 million in an after-tax charge for a cost-optimization program.

For the nine-month period, revenues were flat at $14.3 billion, and net income fell 48 percent to $1.29 billion.

The U.S. accounted for about 20 percent of the company's revenues in the fiscal third quarter. RIM sells phones and service in 175 countries.

All told, the company shipped 800,000 PlayBooks in its first three fiscal quarters, with only 151,000 shipped in the third quarter and 500,000 in the second quarter. It's available in 44 countries.
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