RIM and Palm both show defiance amid the downturn
Published: 22 December, 2008
RIM and Palm both announced quarterly results that reflected the tightening device market, but the former remained buoyant about its prospects, while the latter is clinging to hopes for its upcoming new operating system, Nova, due to launch next month.
Palm admitted it was operating in an "extremely tough climate" with "continued challenges in coming months", but sought to distract investors from the bad news with more hints about Nova, a Linux-based system that Palm hopes will take it into the high profile consumer smartphone sector, alongside the iPhone, BlackBerry Storm, Sony Ericsson Xperia X1 and others. Palm will stick to Windows Mobile as its main platform for enterprise customers, said CEO Ed Colligan, who dismissed claims that Nova is entering an increasingly competitive segment too late as "ridiculous".
Colligan said Palm would return to profitability during calendar year 2010, but reported that revenue in its second quarter, which ended in November, fell by 39% year-on-year to $171m. Smartphone sellthrough reached nearly 600,000 units, down 13%, and Palm suffered a net loss of $80m, excluding one-time charges - which was twice what analysts had expected, and which rose to $508.6m when a tax charge of $396.7m was included. This was the firm's sixth consecutive quarterly loss.
Over at RIM, third quarter revenue and profit were lower than originally expected, but in line with the Canadian company's recent predictions. The BlackBerry maker turned in revenue of $2.8bn in revenue with net income of $396.5m.
RIM put a positive spin on the figures by stressing that it had "enjoyed our best ever start to the holiday buying season over the past few weeks", driven by the launches of its 3G Bold and Vodafone/Verizon Storm. On the basis of these two key devices, it provided guidance well above what analysts had expected for the current quarter. It now expects revenue of $3.3bn-$3.5bn and earnings per share of 83 cents to 91 cents, well ahead of analyst forecasts of $3bn and 83 cents per share.
The fourth quarter will benefit from the product delays that weakened Q3, and despite US blog reports of high levels of returns of the Storm, the product set a single-day record for new BlackBerry subscribers during the day it went on sale. A RIM spokesperson said: "The Storm has the lowest return rate of any of our PDAs and at this point in its lifecycle, it has the lowest return rate of any PDA we currently sell." RIM shipped 6.7m BlackBerry devices worldwide from September to November, which compares to an expected 6.4m iPhones in the October-December quarter, and in December to February, RIM thinks it will sell 7.5m-8m units.
Gross margins are still healthy at 40% but are falling as RIM moves into higher volume, lower cost markets, but co-CEO Jim Balsillie pledged to keep reducing costs to prevent too much margin erosion.
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