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RIM shares plunge Mike Lazaridis urged "patience and confidence" yesterday, but shareholders are ignoring the co-CEO's call, bloodying shares of Research In Motion Ltd. after the BlackBerry maker's disappointing outlook.
As The Globe and Mail's Iain Marlow reports from RIM's home base of Waterloo, Ont., the BlackBerry maker disappointed investors late yesterday with an outlook for the fourth quarter and its new devices that fell short of what the markets wanted. RIM shares plunged in after-hours trading.
Mr. Lazaridis and his partner at the helm, Jim Balsillie, cut their annual salary to just $1, clearly anticipating the reaction to their third-quarter report, which comes amid a weak showing for RIM's PlayBook tablet and intense competition in smartphones with the likes of the iPhone from Apple Inc. and the Android system from Google Inc. .
RIM earned $265-million (U.S.) or 51 cents a share in the third quarter, which included a huge hit related to its PlayBook inventory and another related to the BlackBerry outage. Without those, earnings per share came in at $1.27. Revenue climbed 24 per cent to $5.2-billion, and the number of subscribers rose to almost 75 million. Shipments topped 14 million.
But the outlook for the fourth quarter indicates revenue of between $4.6-billion and $4.9-billion, shipments of 11 million to 12 million, and earnings per share of 80 cents to 95 cents.
And, importantly, the company warned that its new BlackBerry 10s, equipped with an upgraded operating system, now won't be available until late next year.
Mr. Lazaridis and Mr. Balsillie pledged to press on, review the operations and bring RIM back to its former glory, though Mr. Lazaridis acknowledged on a conference call with analysts that the company has not met expectations, and "we ask for your patience and confidence."
"RIM continues to have strong technology, unique service capabilities and a large installed base of customers, and we are more determined than ever to capitalize on our strengths to overcome the recent execution challenges surrounding product launches and the resulting financial performance," they said in a statement.
Analysts are in no mood for that, signalling dismal times for the Canadian telecommunications giant.
"We believe RIMM missed an opportunity on its earnings call to signal to shareholders that it is painfully aware of the gravity of the situation it is in and to send a clear message to investors on how it intends to rectify the situation," said UBS analysts Phillip Huang and Amitabh Passi, referring to the company by its U.S. stock symbol.
"Instead, we largely heard more of the same, and as we recently wrote, we believe the status quo is simply not good enough any longer," they said as they cut their 12-month price target on RIM shares to $15.50 from $18.
"With BB10 devices now being delayed to the latter part of CY12 and disappointing sell through for BB7, RIMM is now stuck in the unfortunate position of lacking any compelling new products over the next two to three quarters. In the fast evolving world of mobile devices, this would be comparable to eternity."
The UBS analysts are not alone. National Bank Financial has cut its target to $8 from $10, Citigroup to $12 from $14, Barclays to $14 from $16, Canaccord Genuity to $15 from $18, and RBC Dominion Securities to $16 from $20.
CIBC analyst Todd Coupland was not as dire, though, maintaining his target at $25 and telling investors that the delay in the new devices "should not overshadow international subscriber growth," an area where RIM has had a strong showing with an increase of 30 per cent in the quarter.
Pierre Ferragu, senior research analyst at Sanford C. Bernstein in London, said he's "on the sidelines" for now, though his report was grim, citing a fourth quarter with shipments down 15 per cent to 22 per cent and earnings slipping 25 per cent to 37 per cent.
Mr. Ferragu projects RIM earnings per share of $2.88 in its fiscal 2013, and a 13-per-cent drop in shipments to 43 million devices, but services revenues holding steady at $3.6-billion.
"Without any change in strategic direction, we think RIM's stock is unlikely to see any valuation floor in the near term," Mr. Ferragu said.
"We nevertheless see current valuation levels as too low to offer an attractive short opportunity," he said in a research report.
"The company continues to generate about $1-billion of service revenues every quarter and the 75 million BlackBerry users continue to represent a massive strategic value to anyone willing to play a role in smartphones. Last but not least, under different management directions, losses could be avoided and the company could be set back on a decent trajectory. In sum, as management's current denial position is getting less and less tenable and as they committed yesterday to explore multiple strategic opportunities, we see too much upside risk to recommend a short position to investors and maintain our market-perform rating."
He warned in his note of a "likely decline" in RIM's international markets.
- RIM outlook darkens with delay of new smartphone
- In RIM's Waterloo, the stakes 'have never been higher'
- Holding out hope in RIM's hometown
Telus sets its targets Telus Corp. , one of Canada's major telecommunications companies, is targeting revenue and earnings gains in the mid single digits for next year.
Telus is looking at revenue of $10.7-billion to $11-billion, and earnings per share of $3.75 to $4 in 2012, it said today. Revenue from its wireless operations is projected at $5.75-billion to $5.9-billion.
The carrier also plans a voluntary payment of $100-million to its defined benefit pension plan, which is down from $200-million last year and, said chief financial officer Robert McFarlane, "positively impacts earnings and maintains a strong pension funding position that is among the best in corporate Canada."
Financials aside, there are some interesting tidbits in the Telus statement today, notably that its targets are based on "ongoing intense wireless and wireline competition in both business and consumer markets," and growth in overall wireless use among Canadians of between 4 and 4.5 percentage points.
As Telus sees it, growth in the wireless industry will "remain robust due to a combination of increased competition and accelerated adoption of smartphones, tablets and data applications."
Canadian jobless claims rise Initial and renewal claims for jobless benefits climbed 4.2 per cent In Canada in October to 240,700, Statistics Canada said today.
That's a sign of the number of people who could become "beneficiaries" under Canada's employment insurance system. The actual number of people receiving benefits dipped by 1 per cent to 541,200 in October, the federal agency said.
That continues what Statistics Canada said is a year-long downward trend, though unemployment is high, and is expected to stay elevated for some time.
U.S. inflation tame Consumer rices in the United States were flat last month as the annual inflation rate dipped to 3.4 per cent from 3.5 per cent in October.
The so-called core rate, which excludes volatile prices from the overall consumer price index, came in at 0.2 per cent for the month and 2.2 per cent for the year.
"Today's CPI and yesterday's [producer price index]report confirm that price pressures are moderating in the U.S.," said senior economist Krishen Rangasamy of National Bank. "While the accelerating U.S. economy means that [another round of quantitative easing]won't be dispatched for now, at least the softening of pirces gives the Fed room to act if necessary."
French, British at odds Tensions are mounting between France and Britain after the divisive EU summit a week ago.
That was the summit at which Britain's David Cameron chose to stand alone and refuse to sign on to a fiscal pact aimed at easing Europe's debt crisis by imposing budget discipline.
Yesterday, the head of the Bank of France, Christian Noyer, said in a newspaper interview that the ratings agencies should be looking at the British, rather than the French.
Britain, he said, has "higher deficits, as much debt, more inflation, and less growth than we do."
Today, the French finance minister said in a radio interview that, basically, he'd rather be French now than British where the economy is concerned.
"The economic situation of Britain is worrying today," he said.
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In Economy Lab The booms and busts of business cycles are strongly influenced by the mood swings of the public, according to a new statistical analysis published by the National Bureau of Economic Research. Chris Hannay reports.
In International Business In his first speech as Spain's prime minister-elect, Mariano Rajoy pledged to have "no enemies" beyond unemployment, the deficit and economic stagnation. With 22.8 per cent of Spaniards out of work, unemployment alone will be a formidable foe, Naomi Powell writes.
In Globe Careers Changes and trends can be used to design career strategies to weather even the most prolonged economic chill, Wallace Immen writes.
From today's Report on Business