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Research In Motion Goes Into Slow Motion In Q1

Waterloo, Ontario

Research In Motion

went into slower motion
in its fiscal first quarter, posting a sequential decline in sales for the
first time in eight quarters and year-over-year declines in net and operating

The company also
reduced its forecasts for the second quarter and year, in part due to delays in
delivering BlackBerry smartphones with the new BlackBerry OS 7.0 until very
late August, thus missing back-to-school carrier promotions.

To confront the
profit challenge, the company announced a reorganization beginning in the
second fiscal quarter that will include a headcount reduction of an undisclosed
amount. The effort is “focused on taking out redundancies” and reallocating
resources to “focus on the areas that offer the highest growth opportunities
and align with RIM strategic objectives, such as accelerating new product
introductions,” the company said.

Benefits will
occur primarily in the third fiscal quarter, with charges being taken in the
second quarter.

Based on
first-quarter results, “fiscal 2012 has gotten off to a challenging
start,” admitted co-CEO Jim Balsillie. “The slowdown we saw in the first
quarter is continuing into Q2, and delays in new product introductions into the
very late part of August is leading to a lower than expected outlook in the
second quarter.” Nonetheless, he contended, “RIM’s business is
profitable and remains solid overall with growing market share in numerous
markets around the world and a strong balance sheet with almost $3 billion in
cash. We believe that with the new products scheduled for launch in the next
few months and realigning our cost structure, RIM will see strong profit growth
in the latter part of fiscal 2012.”

In the first
quarter, revenues from services and handset sales fell 12 percent to $4.9
billion from the previous quarter’s $5.6 billion, though they were still up 16
percent from the year-ago quarter’s $4.2 billion. Much of the year-over-year
gain came in revenues outside North America, with international sales growing
67 percent year over year.

Income from
operations fell to $897 million from the year-ago $1.06 billion, and net profit
fell year over year by 9.6 percent to $695 million from the year-ago $768.9

Gross margins
slipped to 43.9 percent from the previous quarter’s 44.2 percent and the
year-ago quarter’s 45.4 percent.

Global smartphone
sales in units rose 17.9 percent to 13.2 million from the year-ago quarter but were
down from 41.9 percent in its fiscal fourth quarter and the 43 percent gain
enjoyed during full fiscal 2011.

In the first
quarter, RIM shipped about 500,000 PlayBook tablets in North America.

The company
downwardly revised its second-quarter sales forecast to a range of $4.2-$4.8
billion compared with second-quarter 2010’s $4.62 billion, with gross margins
slipping again to around 39 percent.

At least one
analyst said RIM “could struggle to make its lowered [fiscal] 2012 guidance.” Canaacord
Genuity cited falling Android smartphone prices affecting low-end BlackBerry
sales, RIM’s slowing momentum in emerging markets, aging handset designs and
the delay of OS 7.0.