Bits Blog: Some Analysts Start to Like RIM

Investors, perhaps pleased by any bit of good news from Research in Motion, pushed up the beleaguered BlackBerry maker’s share price on Friday almost 7 percent after a quarterly financial report that, while loss ridden, was not as bad as feared.

Analyst reaction, however, has been more mixed.

A longtime pessimist about RIM, Kris Thompson, with National Bank Financial in Toronto, said he was positive about the company after the release of the second-quarter results. They included a $235 million net loss and revenue of $2.9 billion, an increase from $2.8 billion in the first quarter but well below the $4.2 billion recorded a year ago.

Mr. Thomson, who was one of the first analysts to predict that RIM’s shares would fall below $8 (they were trading at $7.70 at midday on Friday), raised his target price for RIM to $12 and upgraded his rating to outperform.

“My guess is that the stock caught a bottom here, and you’re going to see momentum throughout the holiday season,” Mr. Thompson said in an interview on Thursday. “Everyone was expecting the worst, and they really overperformed on every metric.”

Mr. Thompson said he had expected RIM to generate only average sales per user of $180, but the company reported $230. That, combined with revenue increases in Canada and Britain, he said, suggested that it was having some success selling its current high-end phones,. He said that was a positive sign for the BlackBerry 10 phones, which are expected to arrive next year. RIM hopes to revive BlackBerry with those phones and their new operating system.

“Of course we’re all rooting for them,” said Mr. Thompson. “There’s room for three companies, and we want one of them to be Canadian.”

There was less cheering from several other analysts, even if they did acknowledge that the company’s financial managers had made the best they could out of a bad situation.

Based on the company’s financial statements, several analysts said they thought RIM was selling BlackBerrys for less than it cost to make the devices. In their analyses, RIM’s operating profit now comes entirely from fees it charges wireless carriers for routing BlackBerry users’ data through its unique network and other services.

RIM’s executives declined to answer direct questions about that during a conference call with analysts. But they did indicate that further price cuts would be introduced during the current quarter to maintain BlackBerry sales

Shaw Wu, an analyst at Sterne Agee, said he attributed RIM’s better than expected financial performance to its success at collecting payments on outstanding bills. While Mr. Wu praised the company for that effort, he said the number of uncollected bills would inevitably decline with each quarter, particularly given RIM’s falling sales. In the call with analysts, RIM acknowledged that many carriers had reduced the number of BlackBerrys they stocked.

Almost forgotten in the earnings report was the BlackBerry PlayBook, RIM’s unsuccessful tablet, which is now being cleared out at very low prices, particularly in Canada.

During the quarter, RIM shipped about 130,000 PlayBooks. By comparison, Apple sold 17 million iPads during its last quarter.

While RIM has lots of company when it comes to being unable to break Apple’s hold on the tablet market, the PlayBook’s poor performance is not a good sign for BlackBerry 10. The tablet and the coming phones share the same fundamental operating system. The PlayBook already contains several features that RIM is now showing off on prototypes of the new phone.

A Mobile App for Analysts and Students of the Economy

The America’s Economy app provides constantly updated statistics on key economic indicators, lets users set alerts for when new data will be released and makes it easy to share that data on Facebook and Twitter.

“The release of this app is an example of our commitment to giving taxpayers faster and easier access to the statistics we produce, including the Economic Census, that impact the lives of all Americans,” the Census Bureau director, Robert Groves, said.

The Census Bureau said the app offers the real-time statistics that are driving business hiring, sales and production decisions.

The app is currently available for Google’s suite of Android-powered smartphones and tablets and will come to Apple’s iPhone and iPad in the coming weeks.

The initial release of the app covers 16 economic indicators, including the unemployment rate, Gross Domestic Produce and construction spending, compiled from data from the Commerce Department’s Census Bureau, the Bureau of Economic Analysis, and the Bureau of Labor Statistics, a division of the Department of Labor.

The app is part of the Census Bureau’s broader Web Transformation Project. The agency has also made strides to improve the search and navigation capabilities on its Web site, and it opened up its census data to developers last month to spur innovative new platforms.

The Census Bureau said it would release two more apps over the next few months.

Apple Sales and Profit Miss Analysts’ Estimates

A lot of companies would love to have that problem — if it can be called a problem, given that Apple still managed to sell 28 percent more iPhones last quarter than it did a year earlier.

Yet in the world of outsize expectations that envelops Apple, it still contributed to a rare earnings disappointment from the company.

In response to the earnings report on Tuesday, Apple investors registered their unhappiness with the results by sending its shares down more than 5 percent in after-hours trading. In the regular session, the stock fell 2.9 percent, to $600.92.

The iPhone appeared to be the main issue. In a now-familiar pattern, analysts have been warning of potential weakness in iPhone sales because of the likelihood that the company would introduce a new version of the phone in the fall. Apple invariably brings out a new model around that time, and the anticipation can cause many phone shoppers to delay their purchases, leading to a surge in the holiday quarter.

In a conference call with analysts, Apple executives blamed economic weakness in Europe, Australia, Brazil and other countries for some of the shortfall in iPhone sales. But the company also said that the widespread chatter about whatever smartphone it will sell next was a significant factor.

“We’re reading the same rumors and speculation you are about a new iPhone,” said Peter Oppenheimer, Apple’s chief financial officer.

In the past, Apple has felt the pain of delayed iPhone purchases most acutely in the summer quarter that ends in late September, but it can also start before then. “We’re seeing it earlier than ever,” said Gene Munster, an analyst at Piper Jaffray, who predicted Apple would sell 29 million iPhones, rather than the 26 million it ended up reporting.

It is possible Apple is losing some business to other smartphones, most likely devices running Google’s Android operating system, which have built a substantial following. But Apple is still expected to gain market share this year. Apple’s share among smartphone users in the United States is expected to reach 31 percent in 2012, up from 30 percent last year, according to eMarketer, a firm that compiles data from technology research firms.

Rob Cihra, an analyst at Evercore Partners, said the iPhone was increasingly evolving into a business that has two quarters of gigantic sales, followed by two weaker ones, in which customers wait patiently for a new model. But Mr. Cihra said it would be far more worrisome if customers did not show so much enthusiasm about Apple’s next move.

“That’s the price of having an incredibly popular consumer product,” he said.

Timothy D. Cook, Apple’s chief executive, said there was not much Apple could do about the phenomenon beyond trying to keep its plans secret. “I’m glad people want the next thing,” he said. “I’m not going to put any energy into trying to get people to stop speculating.”

The newest pillar of Apple’s business, the iPad, has started to take some of the pressure off the iPhone to dazzle investors every quarter. For the fiscal third quarter ended June 30, Apple said it sold 17 million iPads, bringing in revenue of $9.17 billion, compared with nine million iPads and $6.05 billion in revenue a year ago.

Those sales got a lift from a new version of the iPad with a higher-resolution display that Apple introduced in March. The iPad now accounts for 26 percent of Apple’s total revenue.

Mr. Cook added that Apple would release the latest version of its Mac operating system, Mountain Lion, on Wednesday.

Apple reported net income of $8.82 billion, or $9.32 a share, up from $7.31 billion, or $7.79 a share, in the period a year earlier. Revenue was $35.02 billion compared with $28.57 billion a year earlier.

The figures were above the $8.68 a share in profit and $34 billion in revenue that Apple had previously forecast for the quarter. But they fell well short of the estimates of Wall Street analysts, who typically take Apple’s own forecasts with a grain of salt because of the company’s long history of underpromising and overdelivering on its financial performance.

Analysts polled by Thomson Reuters had expected Apple to report earnings of $10.36 a share and $37.18 billion in revenue.

But even the growth of the iPad still has not come close to dislodging the iPhone’s importance to Apple. It accounted for 46 percent of the company’s revenue in the quarter, and, according to Mr. Cihra’s estimates, about 60 percent of its profits.

Apple said it expects to report overall revenue of about $34 billion and earnings of $7.65 a share for the current quarter.