Results Reveal RIM Is In Terrible Shape

BlackBerry maker Research In Motion is in worse shape than previously thought, as its Q2 performance announcement reveals weak sales have resulted in a sharp drop in income.

Pre-tax income fell a massive 54 percent to $414 million (£262m) from $904 million (£572m) compared to the previous quarter and revenues dropped to $4.2 billion (£2.7bn), only just achieving the bottom end of the company’s targets.

It shipped 10.6m Blackberrys , lower than the expected 12m, and just 200,000 Playbooks. The Financial Times reported a 20 percent drop on RIM’s share price in after-hours trading on the back of the news.

“Overall unit shipments in the quarter were slightly below our forecast due to lower than expected demand for older models,” co-CEO Jim Balsillie (pictured) said in an announcement. “We will continue to build on the success of the BlackBerry 7 launch to drive the business as we focus our development efforts on delivering the next generation, QNX-based mobile platform next year.”

The firm’s launch of its first BlackBerry 7 devices came very late in the quarter and it predicted a return to growth by Christmas, speculating an increase in revenue from $4.2 billion (£2.7bn) in Q2 to between $5.3 billion (£3.4bn) and $5.6 billion (£3.5bn) for Q3. It also estimated BlackBerry shipments in Q3 to grow between 27-37 percent.

Curtains for RIM’s management

Yesterday’s announcement brings RIM’s shocking decline sharply into focus, reaffirming that it has all but surrendered the smartphone market to Apple and Android devices.

It is widely thought that failure to meet these targets will mean curtains for RIM’s under-fire management team and analysts quickly called the forecasts for Q3 into doubt.

Edward Snyder at Charter Equity Research said to the Guardian: “This report is another nail in the coffin of management. I don’t think anybody believes their guidance. Management’s credibility is at an all-time low. We’re well past the point [where] these guys should be replaced.”

And another analyst, Pierre Ferragu from Sanford C. Bernstein is quoted by Reuters saying the Canadian firm’s management remains in “blatant denial” and their outlook for Q3 is “unrealistic”.

“For instance, the co-CEOs do not recognise the failure of the Playbook and continue to sell its merits in terms of security,” Ferragu said.

All other business

Yesterday’s announcement also revealed that RIM’s share of the consortium that purchased the Nortel patent cache was $780 million (493m).

Also included was the fact that it has so far spent $118 million on its “cost optimisation programme”, with the best part of that spent on staff redundancies and identifying and eliminating “redundant facilities”.