RIM appears immune to handheld woes
June 19, 2001, 5:20 p.m. PT
Research In Motion is poised to deliver strong quarterly results this week despite warnings of weak sales from competitors, analysts say, although competitive pressures may soon creep up on the maker of BlackBerry e-mail pagers.
Other makers of handheld devices, such as Palm and Handspring, have slashed revenue targets by as much as half for the quarter that ends June 30. But analysts say RIM appears to be weathering the storm.
Waterloo, Ontario-based RIM reports first-quarter earnings Thursday–albeit for the quarter ended May 30, a factor that should be considered when comparing RIM’s results to those of its peers’. Nonetheless, RIM is in what analysts call a “sweet spot” because it sells its devices to corporations rather than relying on consumers. Both markets are hurting, but the consumer segment is apparently suffering more than its corporate counterpart.
“RIM is more insulated from the downturn…in the North American economy than Palm and Handspring largely because of their customer base,” said Scott Miller, an analyst at C.E Unterberg, Towbin. “It still looks like (RIM) will get through a weak market in relatively good shape.”
The BlackBerry differs from its competitors in its “always-on, always-connected” ability to send and receive e-mails and to divert messages from a desktop computer to the device. Like its rivals, the BlackBerry includes an address book and calendar.
Analysts expect RIM to report revenue of up to $78 million–down from earlier estimates of around $90 million–and to report earnings of 5 cents a share. In the same quarter last year, RIM had sales of $27 million and break-even earnings.
Paul Coster, an analyst at J.P. Morgan Securities, wrote in a recent research report that RIM should ship about 150,000 devices in its first quarter, down from 184,000 in its fourth quarter due to a temporary slowdown in corporate spending.
Coster noted that RIM’s distributors could face a “modest” buildup of inventory, which when offset by a more diverse group of resellers will still enable RIM to meet forecasts.
“The key thing is guidance. How are RIM and their channels of distribution weathering this IT slowdown?” National Bank Financial analyst Deepak Chopra said.
Chopra even asserts that RIM could beat the consensus estimates but is concerned about how the company will meet his full-year sales target of $387 million and earnings of 25 cents per share.
His concerns include the timing of a large scale launch of RIM pagers on BT Cellnet’s network in England and the timing of compatibility with Lotus Notes e-mail software, which will spur RIM’s partnership efforts with IBM.
RIM is currently in a league of its own, Chopra noted. But analysts said it is only a matter of time before major cell phone makers introduce similar products based on European mobile phone standards.
Coster sees the influx of competitors as a “near-term” possibility and questions how RIM will be able to sell its devices at a premium when faced with products that are half the price or even less than that because of network carrier subsidies.
“We believe RIM will be in danger of missing the high end of the consumer market if it is unable to respond with lower unit prices for a version of the device,” wrote Coster, adding that the company might need to move manufacturing out of Canada to stay competitive.
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