The nightmare of Research In Motion Ltd. (RIMM) continues and so far the company has failed to provide any specific time frame when its free fall will come to an end. Ever since Apple Inc.’s (AAPL) iPhone hit the market, Research In Motion started losing its leadership position. For the last couple of years, the company failed to launch any device that could capture the market from iPhone or Google Inc. (GOOG) developed Android-based high-end smartphones.
After experiencing weak financial results for the first quarter of fiscal 2012, the company reported a highly disappointing future financial guidance. It seems management is doing research in slow motion as the company failed to understand how the tastes and preferences of the consumers are changing. Meanwhile, the market becomes intensely competitive with the emergence of several low-cost Asian phone developers. We do not find any immediate catalyst and therefore downgrade our recommendation to Underperform.
Research In Motion is facing severe problems from several fronts. The company is continuously delaying new products introduction, facing an ever increasing competitive landscape, a stagnant product portfolio, and an unfavorable product mix. Revenue, in the previous quarter, was way below the company’s own guidance. Research In Motion shipped just 13.2 million BlackBerry smartphones in the first quarter of fiscal 2012. Management estimated that the company will ship a mere 11 million – 12.5 million BlackBerry smartphones in the ensuing second quarter of fiscal 2012.
What is most concerning is an even disappointing financial outlook for the rest of fiscal 2012. The new EPS guidance for fiscal 2012 declined 25% from the company’s previous guidance. Research In Motion has failed to cope up with the next-generation market trend, which is rapidly changing in terms of technology, price, and data plan provided by the wireless carriers.
