TORONTO
(Reuters) - Research In Motion Ltd reported
a narrower-than-expected loss on Thursday and the strugglingBlackBerry maker
bolstered its cash reserves, sparking optimism ahead of the launch of its
make-or-break line of next-generation smartphones.
Shares of
RIM surged 20 percent in after-hours trade on indications the company will have plenty of cash to ramp up
production of its new BlackBerry 10 devices and mount a robust marketing
campaign for the revamped line, due in early 2013.
It was the
biggest jump for the stock since a 50 percent surge in December 2003,
underlining the importance of the BB10 launch. The company, which has fallen
far behind its rivals in a smartphone market it once dominated, has staked its
future on the BB10 and its completely redesigned operating system.
RIM's second
fiscal quarter brought shareholders additional glimmers of hope, a break from a
succession of dreadful quarterly reports. The company not
only generated more revenue than Wall Street had forecast but it topped
expectations on the number of devices shipped in the period, which ended on
September 1.
"It's
very impressive," said Jefferies & Co analyst Peter Misek. "I
didn't expect they could execute on the business given the models they have in
the market, but they obviously did really well in emerging markets."
RIM was also
able to bolster its cash pile by collecting on cash owed to the company,
drawing down inventories and cutting costs.
ONE-TIME
PIONEER
A one-time
smartphone pioneer, RIM has failed to keep pace with rivals such as Apple Inc
and Samsung Electronics Co, and its stock price has tumbled about 70 percent
over the past year while its market share shriveled.
But the
latest quarter showed that RIM is still able to lure buyers for its lower-end
smartphones in the more price-conscious emerging markets. And that has helped
make up for ground the BlackBerry has lost to cutting-edge devices such as
Apple's iPhone and Samsung's Galaxy S III in North America and Europe.
"RIM
and its products, however obsolescent, are still relevant in the parts of the
planet where most people live," said CCS Insight analyst John Jackson.
"The bad news is that these results have little or no bearing on what
remains true, and that is, RIM still needs to execute on BB10."
In an
attempt to create a buzz, Chief Executive Thorsten Heins gave a preview of the
new smartphone and its features to app developers at an event on Tuesday in San
Jose, California.
Analysts
said RIM struck the right chords at the event but cautioned that it is hard to
evaluate how well the BB10 devices will work in real world conditions until
they are on the market.
"We are
now just a few months away from our launch and our teams are working night and
day to meet the expectations we have of ourselves," said Heins on a
conference call after the results were released on Thursday.
Heins said
RIM executives have met with dozens of carriers in more than 16 countries in
the last few weeks and the feedback on the new devices so far has been
overwhelmingly positive.
QUARTERLY
RESULTS
Shipments of
BlackBerry smartphones were 7.4 million in the quarter, easily outpacing Wall
Street's expectation of about 6.9 million.
The
Waterloo, Ontario-based company reported
a net loss of $235 million, or 45 cents a share, in its fiscal second quarter.
That compared with a profit of $329 million, or 63 cents, in the same period a
year earlier.
Excluding
one-time restructuring-related items, the loss came in at $142 million, or 27
cents a share, in the quarter just ended.
Revenue rose
to $2.9 billion, a gain of 2 percent from the fiscal first quarter, but the
latest result was down about 30 percent from the same period a year earlier.
Analysts, on
average, had expected RIM to report a loss of 46 cents a share, on revenues of
$2.5 billion, according to Thomson Reuters I/B/E/S.
"You
still have revenue declining 31 percent on a year-over-year basis but it's
certainly not the train wreck that a lot of people feared," said BGC
Partners analyst Colin Gillis. "They live to fight another day."
CASH PILE
RIM also
increased its cash to about $2.3 billion from $2.2 billion in the fiscal first
quarter.
"In the
last two quarters RIM has done a really good job on collecting on
receivables," said Sterne Agee analyst Shaw Wu, but he cautioned that this
was not sustainable over the long run and RIM would have to return to a
profitable business model for it to thrive once again.
While RIM
has warned that it faces another operating loss in its fiscal third quarter, it
expects its cash position to remain stable unless it is hit by restructuring
charges.
Wu believes
that the company can achieve this by continuing to draw down on its
receivables, which stood just shy of $2.2 billion as of Sept 1.
RIM's chief
financial officer said the company had entered into a new secured credit
facility of $500 million which expires in September 2013, and in the first half
RIM realized some $350 million of the up to $1 billion in cost savings it hopes
to achieve in fiscal 2013, which ends on March 2 of next year.
The company,
which earlier this year said it would cut about 5,000 jobs to save money, said
it has already laid off roughly 2,500 workers.
"It's
still bad, but it's a much smaller disaster than expected," said Wu.
"These stocks all trade on expectations. Expectations were really low, and
they were able to beat that."
RIM's
U.S.-listed shares surged 20 percent to $8.55 in trade after the closing bell
on Thursday.
(Additional
reporting by Alastair Sharp, Allison Martell and Cameron French; Editing by
Frank McGurty and Edmund Klamann)
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