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A customer looks at the BlackBerry Playbook in April, 2011. Research in Motion will report Dec. 15 on what many expect to be a grim third quarter. (Ryan Remiorz/THE CANADIAN PRESS/Ryan Remiorz/THE CANADIAN PRESS)
A customer looks at the BlackBerry Playbook in April, 2011. Research in Motion will report Dec. 15 on what many expect to be a grim third quarter. (Ryan Remiorz/THE CANADIAN PRESS/Ryan Remiorz/THE CANADIAN PRESS)

Deflated expectations, but RIM may surprise Add to ...

Research In Motion Ltd. will report Thursday on what many expect to be a grim third quarter. Oddly enough, RIM may have already softened the potential market blow with a surprise announcement on Dec. 2. The headline figure in that release, which many seized on, was the fact that the Waterloo, Ont.-based smartphone giant was revaluing a massive inventory of its powerful but poorly received PlayBook tablet computer – and was booking a pretax charge of $485-million as a result. But industry observers were more worried by worsening smartphone fundamentals, though it didn’t help that the company said it wouldn’t meet full year earnings per share guidance of $5.25 to $6 – which RBC Capital Markets analyst Mike Abramsky noted was the third cut in a row. That day, the company’s stock dropped by nearly 10 per cent.

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The key takeaway from the pre-earnings announcement was that RIM was going to sell fewer BlackBerry smartphones in the fourth quarter (which includes the Christmas buying season) than in the third quarter. That, on the back of the biggest global launch of new BlackBerrys in the company’s history, which took place just in August. Many understood this to mean the company’s stop-gap BlackBerry 7 operating system – which ran on those devices and was meant to do the heavy lifting as RIM transitioned to newer smartphones running the QNX operating system that powers the PlayBook – is faltering much earlier than expected. Despite all the focus on RIM’s PlayBook, which the company has reaffirmed commitment to, the company is still very much a smartphone company. And those smartphones just don’t seem be selling compared to Apple Inc.’s iPhone and devices from HTC Corp. and Samsung running Google Inc.’s Android operating system. In the United States, RIM’s most biggest and most profitable market, its share of the smartphone sales has slumped to 9 per cent from around 24 per cent a year earlier.

Although every bit of news about RIM lately seems bad, there is still hope for the company. An update to the PlayBook’s much criticized software is (meant to be) coming in February. RIM saw year-over-year growth of about 741 per cent. And RIM’s products remain hot-sellers in markets like Indonesia – where a recent device launch with promised discounts to the first 1,000 customers led to a stampede and hospitalizations. Though RIM has already deflated expectations, there is still a capacity for surprises – both positive and negative. If recent events such as what happened in Indonesia are any indication, any good news is likely to be accompanied by bad news, anyway.

Follow on Twitter: @iainmarlow

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