Whoa! I had to do a double take when I was reporting Research in Motion's second quarter earnings on the air moments ago because I couldn't believe they were this weak.
In this case, looks were not deceiving.
RIM did in fact beat on the bottom line, reporting $1.03 against the $1 Wall Street was looking for. And the company's 44.1 percent gross margin was also better than expected and encouraging. But that good news came on lighter than expected revenue with RIM reporting $3.53 billion versus the $3.6 billion consensus. And the numbers go downhill from there: The 3.8 million subscribers comes against the 4.1 million expected; the 8.3 million Blackberrys shipped contrasts sharply with the 8.7 million analysts anticipated.
And looking at Third Quarter guidance, the news gets even more dismal, at least as far as RIM's historical performance is concerned: RIM is offering an EPS range of $1 to $1.08. Analysts were expecting $1.05. The revenue range from the company is now $3.6 billion to $3.85 billion, which falls well below the consensus estimate of $3.9 billion. RIM also expects 4 million to 4.3 million new subscribers, which is again lower than the 4.3 million Wall Street was looking for.
The snap judgment would be to take the entire smartphone sector lower based on RIM's news, but this actually might be veiled, good news for the likes of Apple . Was RIM's lackluster report a sign that the entire sector is slowing, and dramatically? Or are these numbers a result of changes in the company's release schedule for its newest handsets? Or are RIM's problems its own, spurred by stronger interest in offerings from its competitors, like Apple and Palm ? I think there's every indication that it is likely the latter, and not the former.