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Fri 28 Sep 2012 11:36 AM

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BlackBerry maker posts narrower than expected loss

Research In Motion's results spark optimism ahead of launch of next-gen smartphones

BlackBerry maker posts narrower than expected loss

Research In Motion Ltd reported a narrower-than-expected loss on Thursday and
the struggling BlackBerry maker bolstered its cash reserves, sparking optimism
ahead of the launch of its make-or-break line of next-generation

Shares of RIM surged 20 percent in after-hours trade on indications the
company will have plenty of cash to ramp up production of its new BlackBerry 10
devices and mount a robust marketing campaign for the revamped line, due in
early 2013.

It was the biggest jump for the stock since a 50 percent surge in December
2003, underlining the importance of the BB10 launch. The company, which has
fallen far behind its rivals in a smartphone market it once dominated, has
staked its future on the BB10 and its completely redesigned operating

RIM's second fiscal quarter brought shareholders additional glimmers of hope,
a break from a succession of dreadful quarterly reports. The company not only
generated more revenue than Wall Street had forecast but it topped expectations
on the number of devices shipped in the period, which ended on September

"It's very impressive," said Jefferies & Co analyst Peter Misek. "I
didn't expect they could execute on the business given the models they have in
the market, but they obviously did really well in emerging markets."

RIM was also able to bolster its cash pile by collecting on cash owed to the
company, drawing down inventories and cutting costs.

A one-time smartphone pioneer, RIM has failed to keep pace with rivals such
as Apple Inc and Samsung Electronics Co, and its stock price has tumbled about
70 percent over the past year while its market share shriveled.

But the latest quarter showed that RIM is still able to lure buyers for its
lower-end smartphones in the more price-conscious emerging markets. And that has
helped make up for ground the BlackBerry has lost to cutting-edge devices such
as Apple's iPhone and Samsung's Galaxy S III in North America and

"RIM and its products, however obsolescent, are still relevant in the parts
of the planet where most people live," said CCS Insight analyst John Jackson.
"The bad news is that these results have little or no bearing on what remains
true, and that is, RIM still needs to execute on BB10."

In an attempt to create a buzz, Chief Executive Thorsten Heins gave a preview
of the new smartphone and its features to app developers at an event on Tuesday
in San Jose, California.

Analysts said RIM struck the right chords at the event but cautioned that it
is hard to evaluate how well the BB10 devices will work in real world conditions
until they are on the market.

"We are now just a few months away from our launch and our teams are working
night and day to meet the expectations we have of ourselves," said Heins on a
conference call after the results were released on Thursday.

Heins said RIM executives have met with dozens of carriers in more than 16
countries in the last few weeks and the feedback on the new devices so far has
been overwhelmingly positive.

Shipments of BlackBerry smartphones were 7.4 million in the quarter, easily
outpacing Wall Street's expectation of about 6.9 million.

The Waterloo, Ontario-based company reported a net loss of $235m, or
45 cents a share, in its fiscal second quarter. That compared with a profit of
$329m, or 63 cents, in the same period a year earlier.

Excluding one-time restructuring-related items, the loss came in at $142m, or 27 cents a share, in the quarter just ended.

Revenue rose to $2.9bn, a gain of 2 percent from the fiscal first
quarter, but the latest result was down about 30 percent from the same period a
year earlier.

Analysts, on average, had expected RIM to report a loss of 46 cents a share,
on revenues of $2.5bn, according to Thomson Reuters.

"You still have revenue declining 31 percent on a year-over-year basis but
it's certainly not the train wreck that a lot of people feared," said BGC
Partners analyst Colin Gillis. "They live to fight another day."

RIM also increased its cash to about $2.3bn from $2.2bn in the
fiscal first quarter.

"In the last two quarters RIM has done a really good job on collecting on
receivables," said Sterne Agee analyst Shaw Wu, but he cautioned that this was
not sustainable over the long run and RIM would have to return to a profitable
business model for it to thrive once again.

While RIM has warned that it faces another operating loss in its fiscal third
quarter, it expects its cash position to remain stable unless it is hit by
restructuring charges.

Wu believes that the company can achieve this by continuing to draw down on
its receivables, which stood just shy of $2.2bn as of Sept 1.

RIM's chief financial officer said the company had entered into a new secured
credit facility of $500m which expires in September 2013, and in the
first half RIM realized some $350m of the up to $1bn in cost
savings it hopes to achieve in fiscal 2013, which ends on March 2 of next

The company, which earlier this year said it would cut about 5,000 jobs to
save money, said it has already laid off roughly 2,500 workers.

"It's still bad, but it's a much smaller disaster than expected," said Wu.
"These stocks all trade on expectations. Expectations were really low, and they
were able to beat that."

RIM's U.S.-listed shares surged 20 percent to $8.55 in trade after the
closing bell on Thursday.

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