RIM shares fell 7.9% to $10.34 in after-hours trading, pushing the Canadian company’s market capitalization under $6 billion, down from more than $39 billion at the start of last year.
Research In Motion Ltd. warned its business is deteriorating and will likely lose money for the second straight quarter, underscoring the uphill battle to turn around its flagging BlackBerry smartphone business. The dire outlook comes as RIM scrambles to cut costs ahead of the rollout of its next BlackBerry expected this year. RIM is depending on this phone and a new mobile operating system to rescue the business, yet it still hasn’t provided a date for the debut. Last year, RIM took a nearly half-billion-dollar write-down on unsold PlayBooks. In its last fiscal quarter, it wrote down $267 million in unsold BlackBerrys.
Analysts have been marking down their earnings estimate for the quarter for weeks, but most had still figured RIM would turn a small profit in the period. The company posted a $930 million profit in the year-earlier quarter, and it has maintained an annual profit since fiscal 2004. RIM also announced Tuesday it had hire outside advisers from J.P. Morgan Securities and RBC Capital to assist in a previously announced strategic review of options and to help its board to figure out how to salvage- or sell parts of its business. But RIM also said its cash holdings would increase in the quarter, from last period’s $2.1 billion stockpile. That is still a healthy cushion, and with RIM essentially debt free, it could alleviate some worry that RIM risks burning through cash as it scrambles to unroll its next phone by year-end.
Thomas Doherty is a student at Villanova University majoring in Finance and Economics. All questions and comments can be sent to Thomas@KeeneOnTheMarket.com
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