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 Results
WATERLOO, ONTARIO — (Marketwire) — 06/28/12 — Research In Motion
Limited (RIM) (NASDAQ:RIMM)(TSX:RIM), a world leader in the mobile
communications market, today reported first quarter results for the
three months ended June 2, 2012 (all figures in U.S. dollars and U.S.
GAAP, except where otherwise indicated).
Highlights:
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— Cash, cash equivalents, short-term and long-term investments increased
to $2.2 billion at the end of the first quarter
— Cash flow from operations was approximately $710 million in the first
quarter
— Revenue of $2.8 billion in Q1, down 33% from $4.2 billion in the prior
quarter
— GAAP net loss in Q1 of $518 million or $0.99 per share diluted; adjusted
net loss of $192 million or $0.37 per share diluted
— Shipments of BlackBerry smartphones were 7.8 million and shipments of
BlackBerry 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 reduction
of approximately 5,000 employees as part of RIM’s efforts to realize
over $1 billion in cost savings, based on RIM’s Q4 FY2012 run rate
— Launched World Tour BlackBerry Jam developer sessions in 23 countries
resulting in strong adoption and support by application and developer
partners for BlackBerry 10 platform
— BlackBerry App World continues to grow with over 89,000 applications
available
— The overall BlackBerry subscriber base continued to grow, and the
subscriber base grew in all regions except for North America
— RIM names Steve Zipperstein, former General Counsel of Verizon Wireless,
as Chief Legal Officer
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Q1 Results
Revenue for the first quarter of fiscal 2013 was $2.8 billion, down
33% from $4.2 billion in the previous quarter and down 43% from $4.9
billion in the same quarter of fiscal 2012. The revenue breakdown for
the quarter was approximately 59% for hardware, 36% for service and
5% for software and other revenue. During the quarter, RIM shipped
7.8 million BlackBerry smartphones and approximately 260,000
BlackBerry PlayBook tablets.
GAAP net loss for the quarter was $518 million, or $0.99 per share
diluted, compared with a GAAP net loss of $125 million, or $0.24 per
share diluted, in the prior quarter and GAAP net income of $695
million, or $1.33 per share diluted, in the same quarter last year.
Adjusted net loss for the first quarter was $192 million, or $0.37
per share diluted. Adjusted net loss and adjusted diluted loss per
share exclude the impact of pre-tax charges of $335 million ($326
million on an after tax basis), which are predominantly non-cash
related to the impairment of goodwill. This charge and its related
impact on GAAP net loss and diluted loss per share are summarized in
the table below.
“Our first quarter results reflect the market challenges I have
outlined since my appointment as CEO at the end of January. I am not
satisfied with these results and continue to work aggressively with
all areas of the organization and the Board to implement meaningful
changes to address the challenges, including a thoughtful realignment
of resources and honing focus within the Company on areas that have
the greatest opportunities,” said Thorsten Heins, President and CEO.
“Our top priority going forward is the successful launch of our first
BlackBerry 10 device, which we now anticipate will occur in the first
quarter of calendar 2013. In parallel with the roll out of
BlackBerry 10, we are aggressively working with our advisors on our
strategic review and are actively evaluating ways to better leverage
our assets and build on our strengths, including our growing
BlackBerry subscriber base of approximately 78 million, our large
enterprise installed base, our unique network architecture and our
industry leading security capabilities.”
The total of cash, cash equivalents, short-term and long-term
investments was $2.2 billion as of June 2, 2012, compared to $2.1
billion at the end of the previous quarter, an increase of
approximately $100 million from the prior quarter. Cash flow from
operations in Q1 was approximately $710 million. Uses of cash
included intangible asset additions of approximately $285 million,
capital expenditures of approximately $155 million and a business
acquisition of approximately $100 million.
BlackBerry 10 Update
The successful launch of the BlackBerry 10 platform and the delivery
of high quality, full-featured BlackBerry 10 smartphones remain the
Company’s number one priority. Over the past several weeks, RIM’s
software development teams have made major progress in the
development of key features for the BlackBerry 10 platform; however,
the integration of these features and the associated large volume of
code into the platform has proven to be more time consuming than
anticipated. As a result, the Company now expects to launch the first
BlackBerry 10 smartphones in market in Q1 of calendar 2013.
“RIM’s development teams are relentlessly focussed on ensuring the
quality and reliability of the platform and I will not compromise the
product by delivering it before it is ready. I am confident that the
first BlackBerry 10 smartphones will provide a ground-breaking next
generation smartphone user experience,” said Thorsten Heins,
President and CEO. “We are encouraged by the traction that the
BlackBerry 10 platform is gaining with application developers and
content partners following the successful BlackBerry Jam sessions
that we have held around the world since the beginning of May.
Similarly, the reception of the BlackBerry 10 platform by our key
carrier partners has been very positive and they are looking forward
to going to market with BlackBerry 10 smartphones in the first
quarter of calendar 2013.”
Organizational Update
RIM today also announced the appointment of Steve Zipperstein, former
General Counsel of Verizon Wireless, as its Chief Legal Officer.
Prior to joining Verizon, Mr. Zipperstein previously served as Deputy
General Counsel for GTE Corporation and was employed with the United
States Department of Justice as a federal prosecutor. Mr. Zipperstein
joins Kristian Tear, Chief Operating Officer and Frank Boulben, Chief
Marketing Officer as the latest additions to RIM’s executive
management team.
CORE Program
The Company announced its CORE (Cost Optimization and Resource
Efficiency) program in March of this year. The program is focused on
delivering operational savings through various initiatives, with
financial objectives for the program targeted to drive at least $1
billion in savings by the end of fiscal 2013, based on RIM’s Q4
FY2012 run rate. As a result of the shift in BlackBerry 10 launch
timeline, the increasingly competitive environment, as well as the
identification of additional cost saving and efficiency
opportunities, the Company may increase the scope and magnitude of
these programs, and considers these original estimates as minimum
numbers it will be pursuing.
To date, the Company has started implementing a number of these
initiatives including:
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— a reduction in the number of layers of management to drive better
clarity, efficiency and accountability across the organization;
— the continued streamlining of our supply chain, which includes the
consolidation of our manufacturing footprint from 10 external
manufacturing sites to three, and working closely with our suppliers and
other 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 more
effectively leverage marketing windows and prioritize our marketing
efforts and spend in regions that offer the highest opportunity and
return;
— further outsourcing of non-core functions as determined during the
implementation of the CORE program; and
— a global workforce reduction of approximately 5,000 employees, which is
expected to be completed by the end of fiscal 2013.
*T
The Company expects to incur restructuring related charges of
approximately $350 million by the end of fiscal 2013, primarily
associated with the global workforce reduction. Other charges and
cash costs may occur during this process, and the Company intends to
share more details throughout the year regarding its progress as
programs are implemented or changes are completed.
Outlook
The Company expects the next several quarters to continue to be very
challenging for its business based on the increasing competitive
environment, lower handset volumes, potential financial and other
impacts from the delay of BlackBerry 10, pressure to reduce RIM’s
monthly infrastructure access fees, and the Company’s plans to
continue to aggressively drive sales of BlackBerry 7 handheld
devices. The Company expects to report an operating loss in the
second quarter of fiscal 2013, as RIM continues to invest in
marketing programs and continues to work through the transition to
BlackBerry 10, as well as the Company’s fixed costs being allocated
over a lower volume of shipments. This outlook excludes the impact of
charges related to the CORE Program.
*T
Reconciliation of GAAP net loss and diluted loss per share to adjusted net
loss and adjusted diluted loss per share:
(United States dollars, in millions except per share data)
Three months ended
June 2, 2012
—————————-
Net Loss Diluted EPS
(net of (net of
income tax) income tax)
—————————-
As reported $ (518) $ (0.99)
Adjustment:
Impairment of Goodwill(1) 326 0.62
—————————-
Adjusted $ (192) $ (0.37)
—————————-
—————————-
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Note: Adjusted net loss and adjusted diluted loss per share do not
have a standardized meaning prescribed by GAAP and thus are not
comparable to similarly titled measures presented by other issuers.
The Company believes that the presentation of adjusted net loss and
adjusted diluted loss per share enables the Company and its
shareholders to better assess RIM’s operating results relative to its
operating results in prior periods and improves the comparability of
the information presented. Investors should consider these non-GAAP
measures in the context of RIM’s GAAP results.
(1) During the first quarter of fiscal 2013, the Company performed a
goodwill impairment test and based on the results of that test, the
Company recorded a pre-tax goodwill impairment charge of
approximately $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 (North
America), (+1)416-644-3414 (outside North America), or through your
personal computer or BlackBerry(R) PlayBook(TM) tablet at
http://www.rim.com/investors/events/index.shtml. A replay of the conference
call will also be available at approximately 7 pm ET by dialing
(+1)416-640-1917 and entering pass code 4501363#. A replay of the
webcast will be available on your personal computer or BlackBerry
PlayBook tablet by clicking the link above. This replay will be
available 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 the
BlackBerry(R) solution in 1999. Today, BlackBerry products and
services are used by millions of customers around the world to stay
connected to the people and content that matter most throughout their
day. Founded in 1984 and based in Waterloo, Ontario, RIM operates
offices in North America, Europe, Asia Pacific and Latin America. RIM
is listed on the NASDAQ Stock Market (NASDAQ:RIMM) and the Toronto
Stock Exchange (TSX:RIM). For more information, visit http://www.rim.com or
This news release contains forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995
and Canadian securities laws, including statements regarding: the
Company’s current expectations regarding the timing of the BlackBerry
10 smartphone launch; RIM’s plans and strategies to implement
meaningful changes to address its challenges; anticipated continued
growth in the Company’s BlackBerry subscriber base; the Company’s
views regarding the anticipated benefits and customer response to the
BlackBerry 10 smartphones; RIM’s expectations and beliefs relating to
the support of its developer partners and the development of its
ecosystem in advance of the launch of BlackBerry 10; RIM’s plans,
objectives, estimates and expectations regarding the scope, magnitude
and benefits of the CORE program, and the Company’s expectations
regarding restructuring-related charges in fiscal 2013; RIM’s
intention to provide shareholders with updates, when possible,
relating to its progress and challenges; RIM’s outlook, including its
expectation that the business will continue to be very challenging
for the next several quarters, and its expectations regarding the
effects of the intense competition in the wireless communications
industry, declining handset volumes, the impacts from the delay of
BlackBerry 10, pressures to reduce RIM’s monthly infrastructure
access fees, and the financial impact of its sales and marketing
initiatives relating to BlackBerry 7 smartphones; and the Company’s
current expectation that it will continue to report operating losses
in 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”, and
similar terms and phrases are intended to identify these
forward-looking statements. Forward-looking statements are based
on estimates and assumptions made by RIM in light of its experience
and its perception of historical trends, current conditions and
expected future developments, as well as other factors that RIM
believes are appropriate in the circumstances, including but not
limited to general economic conditions, product pricing levels and
competitive intensity, supply constraints, the timing and success of
new product introductions, RIM’s expectations regarding its business,
strategy, opportunities and prospects, including its ability to
implement meaningful changes to address its business challenges, and
RIM’s expectations regarding the cash flow generation of its
business.
Many factors could cause RIM’s actual results, performance or
achievements to differ materially from those expressed or implied by
the forward-looking statements, including, without limitation: RIM’s
ability to enhance current products and develop new products and
services in a timely manner or at competitive prices, including risks
related to further delays in new product introductions, including the
Company’s BlackBerry 10 smartphones; risks related to intense
competition, including RIM’s ability to compete in the tablet market,
strategic alliances or transactions within the wireless
communications industry, and risks relating to RIM’s ability to
maintain or grow its services revenues; RIM’s reliance on carrier
partners and distributors; risks relating to network disruptions and
other business interruptions, including costs, potential liabilities,
lost revenue and reputational damage associated with service
interruptions; RIM’s ability to manage inventory and asset risk;
RIM’s ability to implement and realize the anticipated benefits of
its CORE program; RIM’s ability to maintain or increase its cash
balance; security risks and risks related to the collection, storage,
transmission, use and disclosure of confidential and personal
information; RIM’s ability to attract and retain key personnel; RIM’s
ability to adapt to recent management changes; RIM’s reliance on
suppliers of functional components for its products and risks
relating to its supply chain; RIM’s ability to maintain and enhance
the BlackBerry brand; risks related to RIM’s international
operations; risks related to government regulations, including
regulations relating to encryption technology; RIM’s reliance on
third-party network infrastructure developers, software platform
vendors and service platform vendors; RIM’s ability to expand and
manage its BlackBerry App World applications catalogue; RIM’s
reliance on third-party manufacturers; potential defects and
vulnerabilities in RIM’s products; risks relating to litigation,
including litigation claims arising from the Company’s past practice
of providing forward-looking guidance; RIM’s ability to manage its
past growth and its ongoing development of service and support
operations; potential additional charges relating to the impairment
of goodwill or other intangible assets recorded on RIM’s balance
sheet; disruptions to RIM’s business as a result of shareholder
activism; risks related to intellectual property; and difficulties in
forecasting RIM’s financial results given the rapid technological
changes, evolving industry standards, intense competition and short
product life cycles that characterize the wireless communications
industry.
These risk factors and others relating to RIM are discussed in
greater detail in the “Risk Factors” section of RIM’s Annual
Information Form, which is included in its Annual Report on Form 40-F
and the “Cautionary Note Regarding Forward-Looking Statements”
section of RIM’s MD&A (copies of which filings may be obtained at
http://www.sedar.com or http://www.sec.gov). These factors should be considered
carefully, and readers should not place undue reliance on RIM’s
forward-looking statements. RIM has no intention and undertakes no
obligation 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 Limited
Incorporated under the Laws of Ontario
(United States dollars, in millions except share and per share amounts)
(unaudited)
Consolidated Statements of Operations
Three months ended
——————————-
June 2, March 3, May 28,
2012 2012 2011
—————————————————————————-
Revenue $ 2,814 $ 4,190 $ 4,908
Cost of sales 2,026 2,789 2,752
——————————-
Gross margin 788 1,401 2,156
——————————-
Gross margin % 28.0% 33.4% 43.9%
Operating expenses
Research and development 368 386 423
Selling, marketing and administration 552 650 704
Amortization 176 152 132
Impairment of goodwill 335 355 –
——————————-
1,431 1,543 1,259
——————————-
Income (Loss) from operations (643) (142) 897
Investment income, net 3 5 7
——————————-
Income (Loss) before income taxes (640) (137) 904
Provision (benefit) for income taxes (122) (12) 209
——————————-
Net income (loss) $ (518) $ (125) $ 695
——————————-
——————————-
Earnings (loss) per share
Basic $ (0.99) $ (0.24) $ 1.33
——————————-
——————————-
Diluted $ (0.99) $ (0.24) $ 1.33
——————————-
——————————-
Weighted-average number of common shares
outstanding (000’s)
Basic 524,160 524,160 523,983
Diluted 524,160 524,160 524,524
Total common shares outstanding (000’s) 524,160 524,160 524,112
*T
*T
Research In Motion Limited
Incorporated under the Laws of Ontario
(United States dollars, in millions except per share data) (unaudited)
Consolidated Balance Sheets
June 2, March 3,
As at 2012 2012
—————————————————————————-
Assets
Current
Cash and cash equivalents $ 1,467 $ 1,527
Short-term investments 471 247
Accounts receivable, net 2,551 3,062
Other receivables 255 496
Inventories 1,018 1,027
Income taxes receivable 194 135
Other current assets 512 365
Deferred income tax asset 196 197
———————-
6,664 7,056
Long-term investments 309 337
Property, plant and equipment, net 2,722 2,748
Goodwill – 304
Intangible assets, net 3,372 3,286
———————-
$ 13,067 $ 13,731
———————-
———————-
Liabilities
Current
Accounts payable $ 659 $ 744
Accrued liabilities 2,086 2,382
Deferred revenue 489 263
———————-
3,234 3,389
Deferred income tax liability 216 232
Income taxes payable 9 10
———————-
3,459 3,631
———————-
Shareholders’ Equity
Capital stock and additional paid-in capital 2,441 2,446
Treasury stock (273) (299)
Retained earnings 7,395 7,913
Accumulated other comprehensive income 45 40
———————-
9,608 10,100
———————-
$ 13,067 $ 13,731
———————-
———————-
Research In Motion Limited
Incorporated under the Laws of Ontario
(United States dollars, in millions except per share data) (unaudited)
Consolidated Statements of Cash Flows
For three months ended
——————————–
June 2, 2012 May 28, 2012
—————————————————————————-
Cash flows from operating activities
Net income (loss) $ (518) $ 695
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Amortization 480 355
Deferred income taxes (16) 1
Income taxes payable (1) –
Stock-based compensation 25 23
Impairment of goodwill 335 –
Other 11 23
Net changes in working capital items 395 (77)
——————————–
Net cash provided by operating activities 711 1,020
——————————–
Cash flows from investing activities
Acquisition of long-term investments (118) (67)
Proceeds on sale or maturity of long-term
investments 32 43
Acquisition 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-term
investments 103 162
——————————–
Net cash used in investing activities (759) (782)
——————————–
Cash flows from financing activities
Issuance of common shares – 7
Tax deficiencies related to stock-based
compensation (4) (1)
Purchase of treasury stock – (26)
——————————–
Net cash used in financing activities (4) (20)
——————————–
Effect of foreign exchange loss on cash and
cash equivalents (8) (23)
——————————–
Net increase (decrease) in cash and cash
equivalents for the period (60) 195
Cash and cash equivalents, beginning of
period 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 $ 1,527
Short-term investments 471 247
Long-term investments 309 337
——————————–
$ 2,247 $ 2,111
——————————–
——————————–
