RIM Misses Numbers, Cuts Staff, Gets Audio Patent Suit From Dolby

RIM is in trouble with investors once again after missing its already lowered targets for the last quarter and announcing staff cutbacks. To add to investor pain Dolby Laboratories has taken legal action over RIM's failure to license its audio patents, despite "everyone else in the industry" paying for them.

Focal Points:

• The company reacted to the results by saying it would "streamline" operations and accelerate new product introductions and introduced a new share repurchase program. Revenues did grow against last year's numbers by around 16% to reach $4.9 billion, but fell 12% against the immediate past quarter to February, which included the all-important Christmas season, when revenues were $5.5 billion. The company was at pains to point out that is international revenue is on a high and grew 67% against last year, but that just raises the issue that if international sales are so high, then US sales must be in the basement.
• RIM did manage a stronger margin than most of Wall Street had expected and as a result its net income was on track with guidance, but only just, at $695 million. During the past quarter RIM launched the BlackBerry PlayBook tablet in North America and said it shipped 500,000 units and 13.2 million BlackBerries, in what is the first quarter of its fiscal 2012.
• "Fiscal 2012 has gotten off to a challenging start. The slowdown we saw in the first quarter is continuing into Q2, and delays in new product introductions into the very late part of August is leading to a lower than expected outlook in the second quarter." said Jim Balsillie, Co-CEO at Research In Motion. "RIM's business is profitable and remains solid overall with growing market share in numerous markets around the world and a strong balance sheet with almost $3 billion in cash. We believe that with the new products scheduled for launch in the next few months and realigning our cost structure, RIM will see strong profit growth in the latter part of fiscal 2012."
• The streamlining the company talked about will include a headcount reduction and a reallocation of resources so RIM can focus on high growth areas the company said, but it never put a number on how many staff would go. It did say that since the costs of doing this had not been ironed out yet, it would come as a charge in the second quarter. The announcements had all the hallmarks of a beleaguered management team being surprised by yet another downturn in business.
• It set guidance for the second quarter at between $4.2 billion and $4.8 billion, quite a wide target to hit and said its gross margin would fall form the 44% it managed this quarter, way back to 39%.

Meanwhile Dolby then provided a second investor concern as it filed a lawsuit against saying RIM uses Dolby's audio compression technologies in its smartphones and PlayBook tablets without proper licenses.

There were simultaneous filings in the US and Germany, and a request for an injunction to halt sales of BlackBerry phones and the PlayBook.

 

"Litigation was regrettably our last resort after RIM declined to pay for the use of Dolby's technology," a Dolby spokesman said in a statement. RIM's shares have been sliding all week and it has lost about 6% in the run up to the results and since.