Research in Motion (RIMM) Disappoints on Subscriptions, Guidance

Reserch in Motion (RIMM) is out with a report that investors were waiting for as a proxy for the strength of the US economy. Planes? Rails? Autos? Fedex (FDX)? Nah... smartphones tell us how we're doing as a society.

Let me preface this by saying RIMM's growth rate is the envy of almost every other company, especially of this size but expectations are very high especially after this large of a stock move.

Revenue growth was still very good a lot of uptick in spending as well.

• Revenue jumped to $3.42 billion from $2.24 billion a year earlier as the smartphone maker added another 3.8 million new subscribers, pushing its total to almost 29 million.
• RIM says it sold 7.8 million devices and added 3.8 million net new BlackBerry subscribers in the quarter. That new user number is slightly below the 4.2 million analysts were expecting.
• Gross margins, however, remained healthy at 43.6%, and wider than the 40% margin of the prior quarter. (this was a big key, they promised 43-44% 90 days ago, still way below year ago levels north of 50%) [Apr 3, 2009: Research in Motion Soars on Solid Numbers]
• .. first-quarter net income rose 33% to $643 million, or $1.12 per share, for the three-month period ended May 31. Results included a $175 million tax benefit and $96 million in one-time charges. Without the charge, RIM said it earned $564.4 million, or 98 cents per share. Analysts polled by Thomson Reuters, who typically exclude one-time items from their estimates, forecasted earnings of 94 cents per share.

I won't go into a bevy of detail, there will be numerous in depth stories posted on this company but one trend you can see is an increasing spend on Research and Development (which I don't have an issue with but some investors get antsy because it cuts into the bottom line) and the same in sales / marketing... which shows you the ramp up they are doing to compete with Apple's (AAPL) iPhone. (and maybe to prepare for the Palm PRE)

• R&D spend up 20% sequentially, and 171% year over year
• Sales & Marketing up 27% sequentially, and 158% year over year
  

Guidance

• For the second quarter ending August 29, RIM said it expects revenue of between $3.45 billion and $3.7 billion and earnings per share of between 94 cents and $1.03.

The stock is down to $72s area after hours before the conference call; for all we know it could open up tomorrow after the call smooths concern. But assuming the after hour price holds the stock will have gapped down but still above the 50 day moving average. Technically, we are long but with a whopping 10 shares simply as a holding position as we awaited results. We'll have to see how investors react to the conference call and how the stock holds up in the coming day(s). However, we have a nasty gap in the chart that I believe will eventually be filled whether it be 3 weeks, 3 months, or 3 quarters.

[Apr 13, 2009: Research in Motion Squeezes Blackberry Subscribers as Economy Falls]

Long Research in Motion in fund; no personal position