RIM Posts Huge Q1 Miss: First Net Loss In 8 Years, BlackBerry 10 Launch Delayed, 5,000 Jobs Cut
Analysts anticipated another miss ahead of Research In Motion's first-quarter earnings report on Thursday as sales continue to stall ahead of the struggling smartphone vendor's first BlackBerry 10 smartphone launch, which is expected this October. RIM warned in late May that it would likely see an operating loss in the first fiscal quarter — its first net quarterly loss since fiscal 2004 — but the Street's consensus ranged from a profit of $0.01 per share on $3.1 billion in sales to a net loss of $0.03 per share. The numbers are now in and RIM reported on Thursday that it lost $0.37 per share on revenue of $2.8 billion.
The company said that it plans to cut an additional 5,000 jobs beyond its most recent round of layoffs, and these new efforts will cost the company $300 million. Despite this new round of cost-cutting efforts, the company said it expects to report an operating loss in the fiscal second quarter as well.
To compound matters, unexpected delays will push the launch of RIM's first BlackBerry 10 smartphone back to the first calendar quarter of 2013. RIM previously said the first handset to run its next-generation OS would be released later this year.
RIM CEO Thorsten Heins confirmed on the company's earnings call that it intends to launch a full-touchscreen BlackBerry 10 device in the first quarter next year, and that launch will be followed by the launch of a QWERTY smartphone shortly after. New details surrounding both models leaked earlier this week. Heins also said RIM is exploring opportunities to license BlackBerry 10 to other companies.
RIM sold 7.8 million BlackBerry smartphones during the first fiscal quarter of 2013, down 41% from the same quarter a year earlier, and the firm's cash on hand rose to $2.2 billion.
The company's stock plummeted more than 17% in after-hours trading on the news. RIM's full earnings release follows below.
Research In Motion Reports First Quarter Fiscal 2013 ResultsWATERLOO, ONTARIO — (Marketwire) — 06/28/12 — Research In MotionLimited (RIM) (NASDAQ:RIMM)(TSX:RIM), a world leader in the mobilecommunications market, today reported first quarter results for thethree months ended June 2, 2012 (all figures in U.S. dollars and U.S.GAAP, except where otherwise indicated). Highlights: *T – Cash, cash equivalents, short-term and long-term investments increasedto $2.2 billion at the end of the first quarter– Cash flow from operations was approximately $710 million in the firstquarter– Revenue of $2.8 billion in Q1, down 33% from $4.2 billion in the priorquarter– GAAP net loss in Q1 of $518 million or $0.99 per share diluted; adjustednet loss of $192 million or $0.37 per share diluted– Shipments of BlackBerry smartphones were 7.8 million and shipments ofBlackBerry PlayBook tablets were approximately 260,000– BlackBerry 10 smartphone launch now scheduled for Q1 of calendar 2013– Restructuring efforts underway that will include a workforce reductionof approximately 5,000 employees as part of RIM's efforts to realizeover $1 billion in cost savings, based on RIM's Q4 FY2012 run rate– Launched World Tour BlackBerry Jam developer sessions in 23 countriesresulting in strong adoption and support by application and developerpartners for BlackBerry 10 platform– BlackBerry App World continues to grow with over 89,000 applicationsavailable– The overall BlackBerry subscriber base continued to grow, and thesubscriber base grew in all regions except for North America– RIM names Steve Zipperstein, former General Counsel of Verizon Wireless,as Chief Legal Officer *T Q1 Results Revenue for the first quarter of fiscal 2013 was $2.8 billion, down33% from $4.2 billion in the previous quarter and down 43% from $4.9billion in the same quarter of fiscal 2012. The revenue breakdown forthe quarter was approximately 59% for hardware, 36% for service and5% for software and other revenue. During the quarter, RIM shipped7.8 million BlackBerry smartphones and approximately 260,000BlackBerry PlayBook tablets. GAAP net loss for the quarter was $518 million, or $0.99 per sharediluted, compared with a GAAP net loss of $125 million, or $0.24 pershare diluted, in the prior quarter and GAAP net income of $695million, or $1.33 per share diluted, in the same quarter last year. Adjusted net loss for the first quarter was $192 million, or $0.37per share diluted. Adjusted net loss and adjusted diluted loss pershare exclude the impact of pre-tax charges of $335 million ($326million on an after tax basis), which are predominantly non-cashrelated to the impairment of goodwill. This charge and its relatedimpact on GAAP net loss and diluted loss per share are summarized inthe table below. "Our first quarter results reflect the market challenges I haveoutlined since my appointment as CEO at the end of January. I am notsatisfied with these results and continue to work aggressively withall areas of the organization and the Board to implement meaningfulchanges to address the challenges, including a thoughtful realignmentof resources and honing focus within the Company on areas that havethe greatest opportunities," said Thorsten Heins, President and CEO."Our top priority going forward is the successful launch of our firstBlackBerry 10 device, which we now anticipate will occur in the firstquarter of calendar 2013. In parallel with the roll out ofBlackBerry 10, we are aggressively working with our advisors on ourstrategic review and are actively evaluating ways to better leverageour assets and build on our strengths, including our growingBlackBerry subscriber base of approximately 78 million, our largeenterprise installed base, our unique network architecture and ourindustry leading security capabilities." The total of cash, cash equivalents, short-term and long-terminvestments was $2.2 billion as of June 2, 2012, compared to $2.1billion at the end of the previous quarter, an increase ofapproximately $100 million from the prior quarter. Cash flow fromoperations in Q1 was approximately $710 million. Uses of cashincluded intangible asset additions of approximately $285 million,capital expenditures of approximately $155 million and a businessacquisition of approximately $100 million. BlackBerry 10 Update The successful launch of the BlackBerry 10 platform and the deliveryof high quality, full-featured BlackBerry 10 smartphones remain theCompany's number one priority. Over the past several weeks, RIM'ssoftware development teams have made major progress in thedevelopment of key features for the BlackBerry 10 platform; however,the integration of these features and the associated large volume ofcode into the platform has proven to be more time consuming thananticipated. As a result, the Company now expects to launch the firstBlackBerry 10 smartphones in market in Q1 of calendar 2013. "RIM's development teams are relentlessly focussed on ensuring thequality and reliability of the platform and I will not compromise theproduct by delivering it before it is ready. I am confident that thefirst BlackBerry 10 smartphones will provide a ground-breaking nextgeneration smartphone user experience," said Thorsten Heins,President and CEO. "We are encouraged by the traction that theBlackBerry 10 platform is gaining with application developers andcontent partners following the successful BlackBerry Jam sessionsthat we have held around the world since the beginning of May.Similarly, the reception of the BlackBerry 10 platform by our keycarrier partners has been very positive and they are looking forwardto going to market with BlackBerry 10 smartphones in the firstquarter of calendar 2013." Organizational Update RIM today also announced the appointment of Steve Zipperstein, formerGeneral Counsel of Verizon Wireless, as its Chief Legal Officer.Prior to joining Verizon, Mr. Zipperstein previously served as DeputyGeneral Counsel for GTE Corporation and was employed with the UnitedStates Department of Justice as a federal prosecutor. Mr. Zippersteinjoins Kristian Tear, Chief Operating Officer and Frank Boulben, ChiefMarketing Officer as the latest additions to RIM's executivemanagement team. CORE Program The Company announced its CORE (Cost Optimization and ResourceEfficiency) program in March of this year. The program is focused ondelivering operational savings through various initiatives, withfinancial objectives for the program targeted to drive at least $1billion in savings by the end of fiscal 2013, based on RIM's Q4FY2012 run rate. As a result of the shift in BlackBerry 10 launchtimeline, the increasingly competitive environment, as well as theidentification of additional cost saving and efficiencyopportunities, the Company may increase the scope and magnitude ofthese programs, and considers these original estimates as minimumnumbers it will be pursuing. To date, the Company has started implementing a number of theseinitiatives including: *T – a reduction in the number of layers of management to drive betterclarity, efficiency and accountability across the organization;– the continued streamlining of our supply chain, which includes theconsolidation of our manufacturing footprint from 10 externalmanufacturing sites to three, and working closely with our suppliers andother partners to identify ways to drive further efficiency;– outsourcing key parts of the Company's Global Repair operations,including management of device level repairs;– targeted use of resources in our sales and marketing initiatives to moreeffectively leverage marketing windows and prioritize our marketingefforts and spend in regions that offer the highest opportunity andreturn;– further outsourcing of non-core functions as determined during theimplementation of the CORE program; and– a global workforce reduction of approximately 5,000 employees, which isexpected to be completed by the end of fiscal 2013. *T The Company expects to incur restructuring related charges ofapproximately $350 million by the end of fiscal 2013, primarilyassociated with the global workforce reduction. Other charges andcash costs may occur during this process, and the Company intends toshare more details throughout the year regarding its progress asprograms are implemented or changes are completed. Outlook The Company expects the next several quarters to continue to be verychallenging for its business based on the increasing competitiveenvironment, lower handset volumes, potential financial and otherimpacts from the delay of BlackBerry 10, pressure to reduce RIM'smonthly infrastructure access fees, and the Company's plans tocontinue to aggressively drive sales of BlackBerry 7 handhelddevices. The Company expects to report an operating loss in thesecond quarter of fiscal 2013, as RIM continues to invest inmarketing programs and continues to work through the transition toBlackBerry 10, as well as the Company's fixed costs being allocatedover a lower volume of shipments. This outlook excludes the impact ofcharges related to the CORE Program. *T Reconciliation of GAAP net loss and diluted loss per share to adjusted netloss and adjusted diluted loss per share:(United States dollars, in millions except per share data)Three months endedJune 2, 2012—————————-Net Loss Diluted EPS(net of (net ofincome tax) income tax)—————————-As reported $ (518) $ (0.99)Adjustment:Impairment of Goodwill(1) 326 0.62—————————-Adjusted $ (192) $ (0.37)——————————————————– *T Note: Adjusted net loss and adjusted diluted loss per share do nothave a standardized meaning prescribed by GAAP and thus are notcomparable to similarly titled measures presented by other issuers.The Company believes that the presentation of adjusted net loss andadjusted diluted loss per share enables the Company and itsshareholders to better assess RIM's operating results relative to itsoperating results in prior periods and improves the comparability ofthe information presented. Investors should consider these non-GAAPmeasures in the context of RIM's GAAP results. (1) During the first quarter of fiscal 2013, the Company performed agoodwill impairment test and based on the results of that test, theCompany recorded a pre-tax goodwill impairment charge ofapproximately $335 million, or $326 million after tax. Conference Call and Webcast A conference call and live webcast will be held beginning at 5 pm ET,June 28, 2012, which can be accessed by dialing 1-800-814-4859 (NorthAmerica), (+1)416-644-3414 (outside North America), or through yourpersonal computer or BlackBerry(R) PlayBook(TM) tablet atwww.rim.com/investors/events/index.shtml. A replay of the conferencecall will also be available at approximately 7 pm ET by dialing(+1)416-640-1917 and entering pass code 4501363#. A replay of thewebcast will be available on your personal computer or BlackBerryPlayBook tablet by clicking the link above. This replay will beavailable until midnight ET, July 12, 2012. About Research In Motion Research In Motion (RIM), a global leader in wireless innovation,revolutionized the mobile industry with the introduction of theBlackBerry(R) solution in 1999. Today, BlackBerry products andservices are used by millions of customers around the world to stayconnected to the people and content that matter most throughout theirday. Founded in 1984 and based in Waterloo, Ontario, RIM operatesoffices in North America, Europe, Asia Pacific and Latin America. RIMis listed on the NASDAQ Stock Market (NASDAQ:RIMM) and the TorontoStock Exchange (TSX:RIM). For more information, visit www.rim.com orwww.blackberry.com. This news release contains forward-looking statements within themeaning of the U.S. Private Securities Litigation Reform Act of 1995and Canadian securities laws, including statements regarding: theCompany's current expectations regarding the timing of the BlackBerry10 smartphone launch; RIM's plans and strategies to implementmeaningful changes to address its challenges; anticipated continuedgrowth in the Company's BlackBerry subscriber base; the Company'sviews regarding the anticipated benefits and customer response to theBlackBerry 10 smartphones; RIM's expectations and beliefs relating tothe support of its developer partners and the development of itsecosystem in advance of the launch of BlackBerry 10; RIM's plans,objectives, estimates and expectations regarding the scope, magnitudeand benefits of the CORE program, and the Company's expectationsregarding restructuring-related charges in fiscal 2013; RIM'sintention to provide shareholders with updates, when possible,relating to its progress and challenges; RIM's outlook, including itsexpectation that the business will continue to be very challengingfor the next several quarters, and its expectations regarding theeffects of the intense competition in the wireless communicationsindustry, declining handset volumes, the impacts from the delay ofBlackBerry 10, pressures to reduce RIM's monthly infrastructureaccess fees, and the financial impact of its sales and marketinginitiatives relating to BlackBerry 7 smartphones; and the Company'scurrent expectation that it will continue to report operating lossesin the second quarter of fiscal 2013. The terms and phrases"scheduled", "underway", "will", "continue", "implement", "address","honing", "opportunities", "going forward", "anticipate", "leverage","growing", "believes", "confident", "financial objectives","targeted", "drive", "may", "estimates", "pursuing", "expects","intends" "plans", "work through", "transition", "outlook", andsimilar terms and phrases are intended to identify theseforward-looking statements. Forward-looking statements are basedon estimates and assumptions made by RIM in light of its experienceand its perception of historical trends, current conditions andexpected future developments, as well as other factors that RIMbelieves are appropriate in the circumstances, including but notlimited to general economic conditions, product pricing levels andcompetitive intensity, supply constraints, the timing and success ofnew product introductions, RIM's expectations regarding its business,strategy, opportunities and prospects, including its ability toimplement meaningful changes to address its business challenges, andRIM's expectations regarding the cash flow generation of itsbusiness.Many factors could cause RIM's actual results, performance orachievements to differ materially from those expressed or implied bythe forward-looking statements, including, without limitation: RIM'sability to enhance current products and develop new products andservices in a timely manner or at competitive prices, including risksrelated to further delays in new product introductions, including theCompany's BlackBerry 10 smartphones; risks related to intensecompetition, including RIM's ability to compete in the tablet market,strategic alliances or transactions within the wirelesscommunications industry, and risks relating to RIM's ability tomaintain or grow its services revenues; RIM's reliance on carrierpartners and distributors; risks relating to network disruptions andother business interruptions, including costs, potential liabilities,lost revenue and reputational damage associated with serviceinterruptions; RIM's ability to manage inventory and asset risk;RIM's ability to implement and realize the anticipated benefits ofits CORE program; RIM's ability to maintain or increase its cashbalance; security risks and risks related to the collection, storage,transmission, use and disclosure of confidential and personalinformation; RIM's ability to attract and retain key personnel; RIM'sability to adapt to recent management changes; RIM's reliance onsuppliers of functional components for its products and risksrelating to its supply chain; RIM's ability to maintain and enhancethe BlackBerry brand; risks related to RIM's internationaloperations; risks related to government regulations, includingregulations relating to encryption technology; RIM's reliance onthird-party network infrastructure developers, software platformvendors and service platform vendors; RIM's ability to expand andmanage its BlackBerry App World applications catalogue; RIM'sreliance on third-party manufacturers; potential defects andvulnerabilities in RIM's products; risks relating to litigation,including litigation claims arising from the Company's past practiceof providing forward-looking guidance; RIM's ability to manage itspast growth and its ongoing development of service and supportoperations; potential additional charges relating to the impairmentof goodwill or other intangible assets recorded on RIM's balancesheet; disruptions to RIM's business as a result of shareholderactivism; risks related to intellectual property; and difficulties inforecasting RIM's financial results given the rapid technologicalchanges, evolving industry standards, intense competition and shortproduct life cycles that characterize the wireless communicationsindustry.These risk factors and others relating to RIM are discussed ingreater detail in the "Risk Factors" section of RIM's AnnualInformation Form, which is included in its Annual Report on Form 40-Fand the "Cautionary Note Regarding Forward-Looking Statements"section of RIM's MD&A (copies of which filings may be obtained atwww.sedar.com or www.sec.gov). These factors should be consideredcarefully, and readers should not place undue reliance on RIM'sforward-looking statements. RIM has no intention and undertakes noobligation to update or revise any forward-looking statements,whether as a result of new information, future events or otherwise,except as required by law. *T Research In Motion LimitedIncorporated under the Laws of Ontario(United States dollars, in millions except share and per share amounts)(unaudited)Consolidated Statements of OperationsThree months ended——————————-June 2, March 3, May 28,2012 2012 2011—————————————————————————-Revenue $ 2,814 $ 4,190 $ 4,908Cost of sales 2,026 2,789 2,752——————————-Gross margin 788 1,401 2,156——————————-Gross margin % 28.0% 33.4% 43.9%Operating expensesResearch and development 368 386 423Selling, marketing and administration 552 650 704Amortization 176 152 132Impairment of goodwill 335 355 ——————————–1,431 1,543 1,259——————————-Income (Loss) from operations (643) (142) 897Investment income, net 3 5 7——————————-Income (Loss) before income taxes (640) (137) 904Provision (benefit) for income taxes (122) (12) 209——————————-Net income (loss) $ (518) $ (125) $ 695————————————————————–Earnings (loss) per shareBasic $ (0.99) $ (0.24) $ 1.33————————————————————–Diluted $ (0.99) $ (0.24) $ 1.33————————————————————–Weighted-average number of common sharesoutstanding (000's)Basic 524,160 524,160 523,983Diluted 524,160 524,160 524,524Total common shares outstanding (000's) 524,160 524,160 524,112 *T *T Research In Motion LimitedIncorporated under the Laws of Ontario(United States dollars, in millions except per share data) (unaudited)Consolidated Balance SheetsJune 2, March 3,As at 2012 2012—————————————————————————-AssetsCurrentCash and cash equivalents $ 1,467 $ 1,527Short-term investments 471 247Accounts receivable, net 2,551 3,062Other receivables 255 496Inventories 1,018 1,027Income taxes receivable 194 135Other current assets 512 365Deferred income tax asset 196 197———————-6,664 7,056Long-term investments 309 337Property, plant and equipment, net 2,722 2,748Goodwill - 304Intangible assets, net 3,372 3,286———————-$ 13,067 $ 13,731——————————————–LiabilitiesCurrentAccounts payable $ 659 $ 744Accrued liabilities 2,086 2,382Deferred revenue 489 263———————-3,234 3,389Deferred income tax liability 216 232Income taxes payable 9 10———————-3,459 3,631———————-Shareholders' EquityCapital stock and additional paid-in capital 2,441 2,446Treasury stock (273) (299)Retained earnings 7,395 7,913Accumulated other comprehensive income 45 40———————-9,608 10,100———————-$ 13,067 $ 13,731——————————————–Research In Motion LimitedIncorporated under the Laws of Ontario(United States dollars, in millions except per share data) (unaudited)Consolidated Statements of Cash FlowsFor three months ended——————————–June 2, 2012 May 28, 2012—————————————————————————-Cash flows from operating activitiesNet income (loss) $ (518) $ 695Adjustments to reconcile net income (loss)to net cash provided by operatingactivities:Amortization 480 355Deferred income taxes (16) 1Income taxes payable (1) -Stock-based compensation 25 23Impairment of goodwill 335 -Other 11 23Net changes in working capital items 395 (77)——————————–Net cash provided by operating activities 711 1,020——————————–Cash flows from investing activitiesAcquisition of long-term investments (118) (67)Proceeds on sale or maturity of long-terminvestments 32 43Acquisition of property, plant and equipment (153) (222)Acquisition of intangible assets (284) (560)Business acquisitions, net of cash acquired (105) (27)Acquisition of short-term investments (234) (111)Proceeds on sale or maturity of short-terminvestments 103 162——————————–Net cash used in investing activities (759) (782)——————————–Cash flows from financing activitiesIssuance of common shares - 7Tax deficiencies related to stock-basedcompensation (4) (1)Purchase of treasury stock - (26)——————————–Net cash used in financing activities (4) (20)——————————–Effect of foreign exchange loss on cash andcash equivalents (8) (23)——————————–Net increase (decrease) in cash and cashequivalents for the period (60) 195Cash and cash equivalents, beginning ofperiod 1,527 1,791——————————–Cash and cash equivalents, end of period $ 1,467 $ 1,986—————————————————————-As at June 2, 2012 March 3, 2012—————————————————————————-Cash and cash equivalents $ 1,467 $ 1,527Short-term investments 471 247Long-term investments 309 337——————————–$ 2,247 $ 2,111—————————————————————-