RIM sees sluggish sales of BlackBerry, cuts profit forecast
Research In Motion has sharply cut its quarterly profit forecast, citing sluggish sales of Blackberry smartphones, which are facing security concerns in India and the Middle East as well as stiff competition from other mobile phone makers.business Updated: Apr 29, 2011 16:15 IST
Research In Motion has sharply cut its quarterly profit forecast, citing sluggish sales of BlackBerry smartphones, which are facing security concerns in India and the Middle East as well as stiff competition from other mobile phone makers.
The announcement, revising its quarterly earnings forecast downward to $1.30-1.37 per share for the three months ending May 28, saw the stock tumbling over 11% in after hours trading on the Nasdaq.
The Canadian major is facing stiff competition in the fast-growing smartphones segment from players such as Apple and Motorola. Moreover, the entity is grappling with security issues in many countries, including India.
In a late evening statement on Thursday, RIM said it expects first quarter fully diluted earnings per shares in the range of $1.30-1.37, much lower than the range of $1.47-1.55 projected on March 24.
"This shortfall is primarily due to shipment volumes of BlackBerry smartphones that are now expected to be at the lower end of the range of 13.5-14.5 million forecast in March," the company noted.
According to RIM, there would be a shift in the expected mix of devices shipped toward handsets with lower average selling prices.
Low-priced BlackBerry handsets are seeing brisk sales in emerging markets such as India.
"This mix shift is also expected to result in revenue that is slightly below the range of $5.2-5.6 billion guided on March 24," it said.
Reacting to the news, shares of RIM crashed over 11% to $50.28 in after-hours trading on the Nasdaq. The scrip had gained nearly 2% on Thursday to close at $56.59.
The Canadian entity's forecast comes a few days before the annual meet of BlackBerry developers and customers.
"Expected shipments of BlackBerry PlayBook in the first quarter continue to be in line with our previous expectations and we have not experienced any significant supply disruptions in the first quarter due to the impact of the Japan earthquake," the firm said.
In India, where there are nearly a million BlackBerry users, RIM has been facing security concerns, with the ministry of home affairs asking telecom operators to either provide a monitoring facility to enforcement agencies or stop offering services.
The company has been maintaining that it was an industry issue and it should not be singled out.
Meanwhile, the company on Thursday said it expects strong revenue growth in the third and fourth quarters of this fiscal, helped by launches of new BlackBerry smartphone products, as well as prudent cost management.
The full-year diluted earnings per share is anticipated at about $7.50.