RIM's cash, BlackBerry subscriber numbers in focus ahead of earnings

Tools

Research In Motion (NASDAQ:RIMM) will report its last quarterly earnings before the launch of its BlackBerry 10 platform after the market closes today, and financial analysts will be looking for hints that it has momentum and enough cash on hand to not only get past the launch but make it a success.

When RIM reports its fiscal third-quarter results, analysts will be looking at RIM's cash balance as well as possible BlackBerry subscriber growth. The company may also divulge details about the support it has received so far from carriers for the new platform, on which it is staking its future. So far this week Rogers Wireless in Canada and the four main operators in the United Kingdom have indicated their support for BB10.

Still, the company is expected to report financial losses amid weaker sales. Revenue is expected to fall to $2.7 billion, down 49 percent from its $5.3 billion in the year-ago period, according to analysts polled by Thomson Reuters.

The focus will be on whether RIM has the resources, momentum and moxie to make an impact with BlackBerry 10. RIM plans to hold simultaneous events in New York, London, Dubai and other cities on Jan. 30 to launch the platform. In order to market the platform, RIM will need to burn through cash, which could worry analysts. The company had about $2.3 billion in cash on hand at the end of its fiscal second quarter.

"Cash is king heading into the BB10 product launch...and a [subscriber] base for future upgrades is the next most important factor," Kris Thompson, an analyst at National Bank of Canada, wrote in a research note to clients this week, according to the Wall Street Journal.

In addition to cash, the focus will be on RIM's BlackBerry subscriber base. RIM revealed in late September that it had added 2 million more subscribers to its BlackBerry service, which boosted its shares and gave analysts hope that RIM could make a comeback, since many had expected the firm's subscriber base to decline in advance of the BB10 launch.

Colin Gillis, an analyst with BGC Financial, told the AP that he expects subscriber growth to be flat this quarter and that it would be a negative sign if RIM lost subscribers. "It's one of the reasons while people still have a lot of hope in that platform," he said. "They still have 80 million users. That's a big number."

BlackBerry 10 is a full redesign of RIM's existing BlackBerry operating system. The new platform features a new user interface, BlackBerry Flow, which allows users to scroll seamlessly between apps. BlackBerry Peek allows users to glance at another application without leaving the one a user is currently running. And BlackBerry Hub combines users' various inboxes, messages and notifications.

Analysts have praised early versions of the platform that they have seen, but RIM has not revealed all of the details of the software. The company has said more than 50 operators worldwide have been testing the platform and the new smartphones it will run. Still, RIM faces an uphill climb in regaining market share and mindshare, especially with a brand new platform. RIM saw its global smartphone market share decline to 5.3 percent in the third quarter, according to research firm Gartner, down from 11 percent in the year-ago period. The challenge will be to convert existing BlackBerry customers to the new platform as well as attract non-BlackBerry users with the new hardware.

"Any time a company comes closer to a product launch or revitalization there is enthusiasm in front of that," Gillis said. "The problem is execution, in terms of acceptance in the market place, is front of them."

For more:
- see this WSJ article (sub. req.)
- see this AP article
- see this BBC article

Related Articles:
RIM confident of BlackBerry 10 launch, will release first devices in February
RIM to hold BlackBerry 10 launch event on Jan. 30
RIM submits BlackBerry 10 to testing with 50 carriers
RIM ships 7.4M BlackBerrys, earnings please Wall Street
RIM adds 2M new BlackBerry subscribers