Research In Motion Ltd (BBRY) Competition Heats Up, Short Interest Rises

Page 1 of 2

Research in Motion Ltd. (BBRY)Last Tuesday, Research In Motion Ltd (NASDAQ:BBRY) held its annual shareholders meeting in Waterloo, Ontario, where management formally changed its name from Research In Motion. Shareholders approved the name change by more than two-thirds of the votes cast. This year marks Research In Motion Ltd (NASDAQ:BBRY)’s transition from a mobile communications company into a mobile computing company. However, the latest first quarter earnings results have left investors unimpressed by the turnaround.

During the shareholder meeting, BlackBerry CEO Thorsten Heins explained his three-stage transformation plan to bring BlackBerry back to profitability. The company completed the first stage over the past year by refocusing on the brand, increasing company sentiment, reducing costs and sustaining a strong liquidity position. Research In Motion Ltd (NASDAQ:BBRY) is in the second stage of its turnaround, aiming to build and invest in BlackBerry 10 and its Enterprise Solution for businesses. The third stage focuses on benefiting from the company’s changes and investments and returning to profitability.

Dismal Earnings

BlackBerry announced a net loss of $84 million or $0.16 per share, down from a net profit of $98 million or $0.19 per share in the previous quarter. In the same period last year, BlackBerry posted a loss of $518 million or $0.99 per share. BlackBerry expected to breakeven for the quarter. Revenue came in at $3.07 billion, up from $2.8 billion a year ago and up 15% sequentially from the previous quarter. Gross margin fell to 33.9% from 40.1% last quarter.

Management blamed part of its profit losses on Venezuelan foreign currency regulations that shaved off $0.10 per share from the bottom line. The Venezuelan restrictions cost Research In Motion Ltd (NASDAQ:BBRY) $72 million in service revenues and 2% in gross margins. BlackBerry’s results fell short of consensus expectations of $0.06 earnings per share on $3.4 billion in revenues. The company reported that it will not make an operating profit in the current (second) quarter.

BlackBerry ended the quarter with 72 million subscribers, down from 76 million and 79 million subscribers in the preceding quarters. Subscribers decreased in Latin America, Europe, Middle East, Africa and North America. The company gained ground in Asia-Pacific with additional users. Investors expected the subscriber base to stabilize after the launch of BlackBerry 10, but the company continues to lose subscribers to handsets powered by Apple Inc. (NASDAQ:AAPL), Google and Microsoft Corporation (NASDAQ:MSFT) operating systems.

Although BlackBerry reported weaker-than-expected earnings, the company posted a stronger balance sheet than previous quarters. The company increased its cash and investment balance to $3.1 million and recorded no outstanding debt. The company saved $1 billion in costs with its restructuring program that minimized its workforce and manufacturing facilities.

Investors hammered the stock below $11 per share, down more than 28% in pre-market trading after the company’s disappointing earnings report – price levels seen in November before the launch of BlackBerry 10. At the time of writing, the stock trades at $9.28 per share.

Some believe Research In Motion Ltd (NASDAQ:BBRY) has no future in the smartphone market and that it will go out of business. It is difficult to make these allegations when BlackBerry has no debt on its balance sheet and holds billions of dollars in the bank. The company may become a takeover target – an expensive takeover target that will reward shareholders.

Competition

The smartphone market has become more competitive than six years ago when BlackBerry and Apple Inc. (NASDAQ:AAPL) dominated. Since then, other competitors caught up and flooded the market with differentiated products at competing price levels. Some feel the company underestimated the smartphone market and entered too late with its new BlackBerry 10 handsets. The company has struggled to recover market share from Apple Inc. (NASDAQ:AAPL) and Google in the U.S. smartphone market – a competitive market that Heins believes Research In Motion Ltd (NASDAQ:BBRY) needs to penetrate to remain relevant.

According to market research firm Kantar, Google’s Android operating system dominated the United States with 52% market share during the second quarter. Apple closed the gap with 41.9% share. Apple’s partnership with T-Mobile helped the iPhone maker become the best selling smartphone on T-Mobile in the three-month period ending in May. T-Mobile dumped subsidies and two-year contracts and offered unlocked iPhones at full price – a hit with U.S. customers.

“The highly anticipated release of the iPhone on T-Mobile has benefited iOS in the latest three-month period, though it has not yet impacted T-Mobile’s share in the market,” said Dominic Sunnebo from Kantar. Apple’s iPhone sales made up 31% of T-Mobile’s smartphone sales over the second quarter. AT&T and Verizon accounted for 60.5% and 43.8% of iPhone’s sales, respectively.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!