Financial Trouble Debut of Phones: Research in motion’s already depressed shares feel sharply after the company unexpectedly warned that it would probably post a loss for its first quarter, and several analysts predicted worse was yet to come.
Although RIM, maker of the blackberry, had stopped giving investors financial forecasts, largely because it had consistently failed to meet them over the past year, it took the unusual step of issuing a statement late Tuesday saying that it might lose money in the quarter, which ends Saturday.
RIM’s shares in New York fell Wednesday by 88 cents, or 7.8 percent, to $10.35.
While many analysts had said they expected that RIM might start to lose money this fiscal year, none had predicted it would do so in the first quarter.
RIM reported a loss for its previous quarter, but it was caused by exceptional charges. Before the announcement Tuesday, the consensus of analysts was that the company would earn 42 cents a share in the first quarter, with the most pessimistic forecast at 16 cents.
Financial Trouble Debut of Phones
Unlike many of his colleagues, Kris Thompson of National Bank Financial did not have to lower his target price for RIM’S shares after the announcement. He had predicted since last December that it would fall to $8 a share. He shares the growing concern that RIM’s decline may reach a stage at which a new line of phones and the new blackberry 10 operating system which will appear this year will not be enough to turn the company around.
In a note to investors, Mr. Thompson compared buying RIM’s shares to going to the casino. He wrote that RIM’s announcement Tuesday that in had hired J.P Morgan securities and RBC capital markets, a unit of the royal bank of Canada, to conduct a strategic review was a signal that RIM was for sale. But Ehud Gelblum of Morgan Stanley offers a different analysis in his note to investors.
Mr. Gelblum wrote, using the company’s Nasdaq stock symbol. Instead, he wrote that it was more likely that RIM would sell only a part of it self or turn over the operation of its unique global network, which provides corporate BlackBerry’s with a high level of security, to another company under contract.
While Thorsten Heins, president and chief executive of RIM, had said it would review licensing BlackBerry software to other companies, Mr. Gelblum wrote that this might actually harm the company because it “would just invite others to beat RIM” using its own operating system.
He forecast that RIM’s shares could drop as low as $6 or, if BlackBerry 10 is a success and the company’s business outside North America accelerates, rise to as high as $20. A year ago, RIM traded at more than $43.
Mark Sue of RBC capital markets cut his forecast for RIM’s share price to $11 from $13. He again warned that RIM’s market share could fall below 5 percent. That level is the realm of subscale operations, razor-thin profits and decreasing odds of a turnaround.
He said RIM’s deteriorating finances could hamper the BlackBerry 10 phone introduction and accelerate the move by high-end BlackBerry users in the United States to iPhone’s and phones based on Google’s android operating system. Is it Financial trouble ?