Yesterday, we heard RIM give its Q1 2010 fiscal conference call and I get the feeling Reuters wasn’t even listening. They had the following to say:
“Research In Motion offered investors an outlook yesterday that fell short of some expectations, sending the BlackBerry maker’s stock sliding five per cent even as the company reported a higher quarterly profit that topped forecasts.”
First of all, the stock sliding 5% is not necessarily correlated with the conference call. In my opinion, RIM did an excellent job of reassuring shareholders that the company was strong financially. The outlook they offered did not fall short of expectations. In fact, across the board, financial results were better than predicted and Jim addressed the question period adequately.
According to Reuters, the drop “may reflect concern over a competitive landscape that has become more cluttered with alternatives to the BlackBerry.”
The truth of the matter is that RIM does not see other smartphones as a threat. They addressed this issue very clearly in the conference call.
First, the new iPhone pricing is industry standard and nothing RIM can’t match. Apple is simply selling year-old hardware at a discount. This is nothing new and RIM has been doing this for all their handsets. Secondly, the smartphone market is growing fast enough to allow more device competition. The pie is getting larger and it’s not a matter of who gets what slice.
Reuters also points to the global economy as a reason for the share price drop. Sure, while the recession is affecting IT markets, this isn’t something unique to RIM and therefore shouldn’t be lumped together with saying that RIM didn’t meet expectations of shareholders.
As explained in the conference call, revenue is mainly affected by seasonal trends and the summer is inevitably going to be slow. As a shareholder listening to the call, I might want to move my stock out for the summer, and buy back when it has come down a little. My prediction is that you will see the stock jump significantly after the summer, when the fall and holiday seasons are sure to boost revenues.