The beleaguered BlackBerry handset manufacturer, Research In Motion Ltd.* (BBRY - Analyst Report) , has reported highly disappointing financial results for the first quarter of fiscal 2014. Both the top and the bottom line significantly fell below the Zacks Consensus Estimate. Research In Motion currently has a Zacks Rank #3 (Hold).
(*Research In Motion announced that effective Jan 30, 2013, the company would operate around the world under the name BlackBerry. From Feb 4, 2013, the company’s ticker symbol for trading has been changed from “RIMM” to “BBRY” on NASDAQ. The legal name of the company has not changed, for which the approval of the official change by shareholders will be sought at the company's Annual General Meeting in Jul 2013. During the time, the company will do business as BlackBerry.)
First Quarter Results in Detail
GAAP net loss from continuing operations in the first quarter of fiscal 2014 was $84 million or 16 cents per share compared with a net loss of $518 million or 97 cents per share in the year-ago quarter. After adjusting $17 million of after-tax charges for Cost Optimization and Resource Efficiency (CORE) program, adjusted loss per share was 13 cents in the first quarter of 2014, in contrast to the Zacks Consensus Estimate of earnings of 4 cents per share.
The total revenue in the reported quarter was $3,071 million, up 9.4% year over year but way below the Zacks Consensus Estimate of $3,422 million. Segment wise, Hardware revenues were approximately 71%, Services revenues were 26% and the remaining 3% came from Software and other sources.
In the reported quarter, Research In Motion sold 6.8 million BlackBerry smartphones. The company also sold around 100,000 BlackBerry Playbook tablets. Quarterly gross margin was 33.9% compared with 28% in the prior-year quarter. Quarterly operating loss was $169 million compared with an operating loss of $635 million in the year-ago quarter.
In the first quarter of fiscal 2014, Research In Motion generated $630 million of cash from operations compared with $711 million in the prior-year quarter. Free cash flow in the reported quarter was $547 million compared with $558 million in the year-ago quarter.
Cash and marketable securities, at the end of the first quarter of fiscal 2014, was $3,071 million compared with $2,875 million at the end of fiscal 2013. The balance sheet of Research In Motion remains debt free.
Future Financial Outlook
Management expects the company’s marketing expenditures to increase sequentially due to the global launch of BlackBerry 10-based smartphones and BlackBerry Enterprise Service 10. As a result, the company will incur an operating loss in the ensuing second quarter of fiscal 2014.
Ever since Apple Inc.’s (AAPL - Analyst Report) iPhone hit the market, Research In Motion and Nokia Corp. (NOK - Analyst Report) are facing distressing times. The situation further aggravated once Google Inc. launched its Android software and several handset manufacturers adopted that operating system.
However, Research In Motion launched its BlackBerry 10-based device, which gained market traction initially. We believe that the new device coupled with effective cost management strategy may revive the company’s earnings going forward.