BUSINESS

Research In Motion reports US$329-million Q2 profit, promises return to growth

09/15/2011 04:26 EDT | Updated 01/12/2012 02:08 EST
MONTREAL - Research In Motion's quarterly net profit plunged and its shares took a hit Thursday as the Canadian technology icon booked a big charge for cutting 2,000 jobs and had lower than expected sales of smartphones and tablets.

But co-CEO Mike Lazaridis pledged that RIM will return to growth in the quarters ahead.

He told analysts that updated BlackBerry Bold, Torch and Curve phones only had a few weeks of sales before the second quarter ended and expects strong sales of these smartphones in future.

"We understand that the past few quarters have been challenging," Lazaridis said during a conference call after stock markets closed Thursday. "We are confident that we are on track to return to growth in Q3 and beyond."

In its second quarter, RIM's revenues fell 15 per cent to just under US$4.2 billion from US$4.6 billion, partly due to its aging lineup of BlackBerry smartphones.

The BlackBerry maker, which keeps its books in U.S. dollars, reported its second-quarter net earnings dropped 58 per cent to US$329 million, or 63 cents per diluted share for the three months ended Aug. 31.

That was down from $797 million or $1.46 per share a year ago and was below analyst expectations for the consumer technology company (TSX:RIM).

RIM's bottom line was hit by a pre-tax one-time charge of $118 million related to a cost cutting plan. Excluding the charge, RIM said it earned $419 million or 80 cents a share.

RIM shares were down sharply in after-hours trading, falling as much as 16 per cent. The stock had closed down nine cents at C$29.40 on the Toronto Stock Exchange.

The Waterloo, Ont., company announced in late July it planned to cut 2,000 jobs this year, or about 11 per cent of its global workforce, to cut costs in a highly competitive smartphone market.

"While it's always a difficult decision to reduce head counts, our business and marketplace is dynamic and requires our organization to make adjustments," co-CEO Jim Balsillie said.

"We have completed the major portions of our workforce reductions."

Analysts' estimates compiled by Thomson Reuters had on average expected US$4.5 billion in revenue and a profit of 90 cents per share.

"They are just not selling. They are not competitive," said Peter Misek, an analyst at Jefferies & Co. in New York. "They are getting really hit hard by Android phones."

Misek said RIM's future depends on it releasing new BlackBerrys with the company's long-promised new QNX operating system, designed to better compete with iPhones and Android phones. RIM has promised to release phones with that software in early 2012.

In an outlook for the its current fiscal third quarter, the company said it expected revenues ranging from $5.3 billion and $5.6 billion on BlackBerry smartphone shipments between 13.5 million and 14.5 million units.

Adjusted earnings per share for the third quarter, excluding the impact of job cut charges, is expected to be in the range of $1.20 to $1.40 per share.

A year without a brand new BlackBerry launch hurt the Canadian technology icon as rival Apple and Android devices picked up ground.

During the quarter, RIM shipped about 10.6 million BlackBerry smartphones and 200,000 PlayBook tablets, about half of what analysts had been expecting for tablet sales and more than a million fewer smartphones than expected.

RIM rolled out updated BlackBerrys in August but sales of those devices weren't enough to help its overall financial results. The company also said it sold fewer of its older BlackBerry models.

"We successfully launched a range of BlackBerry 7 smartphones around the world during the latter part of the second quarter and we are seeing strong sell-through and customer interest for these new products," Balsillie said.

"Overall unit shipments in the quarter were slightly below our forecast due to lower than expected demand for older models," Balsillie said.

The BlackBerry brand has dropped 25 per cent of its value to $3.3 billion, down to 10th place in the top 15 Canadian brands, says the latest analysis from the Brand Finance Canada index. RIM's brand had previously been ranked fifth.

With files from Craig Wong, The Associated Press