Research In Motion Goes Into Slow Motion In Q1

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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 income.

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 million.

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.


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