Shares in Research in Motion shot up almost 13% on Friday after better than expected second-quarter results, but doubts remain about the BlackBerry maker’s ability to compete.
BMO Capital Markets analyst Tim Long said the financial results released Thursday were solid, but noted RIM won’t have any new products to sell in the holiday season.
“The future of RIM depends on the success of new BB10 devices, which should start shipping in early 2013,” Long said in a research note.
“At this time, we have not seen enough of BB10 to change our view that the new operating system will not be enough to reverse the dramatic smartphone market share losses,” added Long, who maintained his market perform rating.
And RIM chief executive Thorsten Heins said Friday in a U.S. television interview it is a “good bet” that the new generation of BlackBerry smartphones will launch first with a touchscreen and then with a keyboard about 30 to 60 days later.
The physical keyboard is popular with BlackBerry users, and the company – in its advertising – has positioned that as an advantage over Apple and Android phones that relying solely on touchscreens.
BlackBerry smartphones have been losing market share to Apple’s iPhone and smartphones running Google’s Android operating system, especially in the critical North American market.
Shares were up 89 cents to $7.85, or 12.8 per cent, in late morning trading on the Toronto Stock Exchange.
On Thursday, RIM reported that its quarterly loss was US$235 million or 45 cents per diluted share compared with a profit of $329 million or 63 cents per share a year ago.
The Waterloo, Ont., company’s adjusted loss was $142 million or 27 cents per share – beating analyst expectations.
Jeffries analyst Peter Misek said he was surprised with RIM’s “impressive execution,” but added he believes it was due to aggressive promotions and upgrade programs.
RIM will be in a tougher situation in the next quarter due to the iPhone 5 and other competition, Misek said.
Misek described RIM as a “subscale handset maker” that’s losing share in all major geographies, and with the launch of the iPhone 5 it will lose more market share in the United Kingdom, Canada and other iPhone markets.
He noted that RIM increased its user base to 80 million, up two million in the quarter, but remained unimpressed.
“We believe management lowered the price on monthly subscription fees to keep subscribers and targeted pre-paid subscribers in emerging markets,” Misek wrote in a research note.
Misek is maintaining an underperform rating for RIM.
While large, RIM’s loss was still much better than the 47 cents per share loss expected by analysts polled by Bloomberg.
Much of the optimism came from adjusted earnings per share, which filter out one-time costs like expenses related to job reductions and cost cuts.
National Bank analyst Kris Thompson was enthusiastic about RIM’s quarterly results and increased his target share price to $12 from $8.
“The new management team is executing by maintaining the BlackBerry subscriber base, managing costs and cash and seemingly readying an early 2013 BB10 global platform launch,” Thompson said in a research note.
But despite impressing investors, RIM still has many challenges ahead. Its revenues were notably weaker, down 31 per cent to $2.87 billion from $4.17 billion a year ago.
RIM said it shipped about 7.4 million BlackBerrys during the quarter, down from 7.8 million in the first quarter, showing that interest in its existing models is starting to wane.
RIM also shipped more PlayBook tablets to stores in the quarter, at 260,000 units compared with 130,000 in the first quarter.
The results show that RIM is making some progress as it moves towards to its next generation of BlackBerry smartphones and completes its cost reduction plan, Heins said Thursday.
