Research In Motion (NASDAQ:RIMM) reports its fiscal Q4 and full-year 2006 numbers tomorrow, and investors are already bracing themselves for the bad news. Everyone knows that the firm's very public patent dispute with NTP took a toll on RIM's business this quarter. All that's left to do now is assess the damage.
What analysts say:
- Buy, sell, or waffle? Twenty-nine analysts follow RIM. Of these, 19 still think the stock is a buy. The rest are split six to four, hold to sell.
- Revenues. Apparently, the analysts don't think RIM's business suffered much. They're still expecting to see a 41% rise in quarterly sales to $569.4 million tomorrow.
- Earnings. Profits, however, are expected to fall 6% to $0.67 per share.
What management says:
On March 3, RIM updated investors on what to expect tomorrow as a result of its dispute with NTP. New subscribers are expected to come in well below previous predictions, at about 625,000. Sales are expected to be about 8% weaker than previously predicted, and also lower than analyst expectations. RIM's estimate ranges from $550 million to $560 million. Likewise with profits: RIM expects to see pro forma profits of about $0.65 per share -- $0.02 less than analysts predict and about 17% lower than it was hoping for back in December.
What management does:
The scaled-back expectations of both RIM and its analysts suggest that RIM's past road to success is about to encounter a bump. But what a pleasant road it's been so far:
|
Margins % |
8/04 |
11/04 |
2/05 |
5/05 |
8/05 |
11/05 |
|---|---|---|---|---|---|---|
|
Gross |
49.7 |
50.9 |
52.9 |
54.1 |
55.1 |
55.8 |
|
Op. |
22.8 |
25.8 |
28.6 |
30.3 |
31.2 |
31.6 |
|
Net |
19.4 |
22.3 |
15.8 |
19 |
19.3 |
18.9 |
One Fool says:
Ultimately, I doubt the subscriber growth-slowdown encountered in Q4, the revenue growth deceleration, and the disappointing profits picture will have any major impact on RIM's long-term story. My reasoning: Just look at those numbers above. In 18 months, RIM grew its operating profitability by nearly 40%. Those kinds of margins attract competitors in droves, and ultimately, RIM would have had to slow down anyway, as rivals arrived bearing offers of similar services for lower prices. All the patent dispute really did, then, was give us a taste of what's to come.
Competitors:
- Palm (NASDAQ:PALM)
- Nokia (NYSE:NOK)
- Microsoft (NASDAQ:MSFT)
Microsoft is a Motley Fool Inside Value recommendation.
Fool contributor Rich Smith does not own shares of any company named above.
