Monday, September 20, 2010

$RIMM: The Emperor Has No Guidance

By Eric Jackson
RealMoney Contributor

9/20/2010 5:00 PM EDT
Click here for more stories by Eric Jackson

Research In Motion (RIMM - commentary -Trade Now) put in a beat-and-raise Thursday, which helped the stock price hit $51 in the after-hours session. However, a 10% gain quickly became a loss by the end of Friday's after-hours session. That price action could be an ominous sign for the stock from this point onward.

RIM's second-quarter revenue totaled $4.62 billion, handily beating analysts' expectations of $4.47 billion. Earnings per share came in at $1.46, which also was much higher than the expected $1.39. During the call, the company confirmed that at least 2 cents of this EPS came from the $1.5 billion in stock purchases executed in the quarter.

RIM also raised its guidance on both the top and bottom lines for the third quarter, respectively to ranges of $5.30 to $5.55 billion and $1.62 to $1.70.

Clearly RIM's management and bullish investors were hoping these results would silence the company's growing chorus of critics. The Globe and Mail, the national newspaper of Canada, proclaimed, "RIM Defies Doubters" in a headline. However, The Wall Street Journal ran with a headline that showed quite a different verdict on the company's results: "BlackBerry Gets Squeezed By Rivals."

The reason for such different reaction boils down to two key details contained in the report:

1. RIM announced 4.5 million net new subscribers instead of the 5 million they'd previously guided, and;

2. The company decided that, after the coming quarter, it will no longer provide any future guidance about or details after-the-fact on the net new subscribers or the average selling price (ASP).

If you go back and look at the after-hours price chart for RIM, the cheery party for RIM bulls ended around 5:38 p.m. EDT. That's when Edel Ebbs, vice president of investor relations, dropped the bomb about the coming lack of guidance on net new subs and ASP.


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