Analyst Suggests RIM May Be Losing Money on Hardware Sales

April 11, 2012
By: Rory Lidstone

Things just keep getting worse for Canadian telecommunications company Research In Motion, as Jefferies analyst Peter Misek has concluded in a new research report that the company that created BlackBerry (News - Alert) is now losing money on hardware sales. Misek's conclusion comes after reviewing RIM's March 3rd 40-F filing with the SEC, which is more or less the equivalent of the 10-K filed in the U.S.

It seems that RIM's February 2012 fiscal year included hardware gross margins falling to 20 percent from 36 percent on the basis of Generally Accepted Accounting Principles (GAAP). Rim's non-GAAP gross margin for the fiscal year was 25 percent.

When factoring in operating expenses based on revenue, it would appear that GAAP hardware operating margins dropped to negative eight percent for fiscal year 2012 from a reported 15 percent in 2012. Operating margins for the year were three percent on a non-GAAP basis, or negative four percent after including inventory charges but excluding restructuring costs. It is expected that RIM will post another write-off in the May quarter.

The bad news just keeps piling up for RIM. BlackBerry's market share has been dropping steadily for the last two years as Apple's iPhone and a slew of popular Android (News - Alert) devices asserted market dominance. Going into 2012, the iPhone alone was out shipping all BlackBerry devices 2.85 million to 2.08 million — a stark contrast to the iPhone's debut when BlackBerry devices outsold Apple's (News - Alert) smartphone by about five to one, according to IDC and Bloomberg.

RIM's attempt to enter the tablet market with the BlackBerry PlayBook, too, was a failure as very few devices were sold last year. Again it was an Apple product, the popular iPad, which stopped the PlayBook from gaining any real hold in the market, also possibly undercut by the massive price drop of HP's TouchPad due to its being discontinued.






Edited by Jennifer Russell