One way or another, Research In Motion Ltd. will prove someone right this week.
The BlackBerry maker will announce its 2014 fiscal first-quarter results on Friday. The earnings figures come after weeks of mixed reports on the company from a number of analysts. Within the span of a week, RIM was the subject of a two-notch upgrade at one analyst firm, and then a downgrade at another, as observers argued about whether RIM’s new line of phones was getting better- or worse-than-expected traction.
The contrasting views about the company’s prospects were illustrated in a recent report from RBC Dominion Securities Inc. analyst Mark Sue, who raised his estimates for BlackBerry unit shipments, but added that there is still room for concern.
“Beyond channel-fill, upgrades from diehard users and price stimulation, the picture remains blurry, particularly as competition remains fierce,” Mr. Sue said.
Analysts and investors will get a good look this week at how well the company’s newest line of high-end phones – the touchscreen Z10 and the keyboard-sporting Q10 – are doing in many of the most important markets around the world. However, the picture will not be entirely clear, in part because some of RIM’s biggest carrier partners, such as AT&T and Sprint, have either just started to sell the Q10 or have yet to do so. The timing issues are likely related to the availability of so-called “hero status” at the carriers, when they can dedicate the most marketing resources to RIM’s devices.
The Q5, RIM’s more affordable version of the Q10, went on sale last week, and revenue from the phone will not be included in the company’s earnings report on Friday. However, the phone, and probably other models like it in the near future, will likely have a major impact on RIM’s bottom line in the long run, as the features gap between high-end and low-end phones closes and more and more consumers opt to make cost the primary factor in their purchasing decisions. For now, the Q5 will only be sold in developing-world markets. RIM is widely expected to either start selling the phone in the developed world soon or introduce similar models.
Analysts will be watching closely for BlackBerry 10 sales figures for the quarter. There is a wide range of expectations, with the most conservative analyst estimates predicting 2.5 million units and others calling for upwards of 3.5 million during the same period. Margins and average selling prices on those phones will also be key metrics, as investors look for any signs that the once ultra-profitable smartphone industry is maturing.
“Global demand for high-end smartphones may be decelerating ... with the focus now shifting to the mid-tier in emerging markets, where BlackBerry enjoys positive brand recognition,” Mr. Sue said. “However, the strong emerging-market growth notwithstanding, it’s getting increasingly difficult to generate meaningful profits.”