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BlackBerry Surprises with 4Q Profit

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BlackBerry handset manufacturer Research In Motion Ltd.* has reported mixed financial results for the fourth quarter of fiscal 2013. Despite this, the company surprises with a quarterly profit in contrast to the Zacks Consensus Estimate of a loss. Research In Motion currently has a Zacks Rank #3 (Hold).

(*Research In Motion announced that effective January 30, 2013, the company would operate around the world under the name BlackBerry. From February 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 later in 2013. During the time, the company will do business as BlackBerry.)

Fourth Quarter Results in Detail

GAAP net income from continuing operation in the fourth quarter of fiscal 2013 was $94 million or 18 cents per share compared with a net loss of $118 million or a loss of 23 cents per share in the year-ago quarter. After adjusting $20 million of after-tax charges for Cost Optimization and Resource Efficiency (CORE) program, the fourth-quarter fiscal 2013 adjusted earnings per share were 22 cents, reversing the Zacks Consensus Estimate of a loss of 28 cents per share. 

However, total revenue in the reported quarter was $2,678 million, down by a whopping 36% year over year and fell below the Zacks Consensus Estimate of $2,901 million. Segment wise, Hardware revenue was approximately 61%, Services revenue was 36% and the remaining 3% came from Software and other sources.

In the quarter under review, Research In Motion sold 6 million BlackBerry smartphones including approximately 1 million of the company’s newly launched BlackBerry 10 software-based smartphones. The company also sold around 370,000 BlackBerry Playbook tablets. At the end of fiscal 2013, the global subscriber base of BlackBerry devices decreased by almost 3 million sequentially to a total of approximately 76 million.

Quarterly gross margin was 40.1%, a massive improvement over 33.5% in the prior-year quarter.  Quarterly operating loss was just $12 million compared to an operating loss of $135 million in the year-ago quarter.

During fiscal 2013, Research In Motion generated $2,303 million of cash from operations compared with $2,912 million in fiscal 2012. Free cash flow in fiscal 2013 was $1,890 million compared with $2,010 million in fiscal 2012. Cash and marketable securities, at the end of fiscal 2013, was $2,875 million compared with $2,111 million at the end of fiscal 2012. The balance sheet of Research In Motion remains debt free.

Future Financial Outlook

Management expects that the company’s marketing expenditures will increase by nearly 50% sequentially due to global launch of BlackBerry 10-based smartphones. As a result, the bottom-line will approach a breakeven financial result in the first quarter of fiscal 2014.  

Our Take

Ever since Apple Inc.’s (AAPL - Free Report) iPhone hit the market, Research In Motion and Nokia Corp. (NOK - Free Report) have started facing distressing times. The situation further aggravated once Google Inc. launched its Android software and several handset manufacturers adopted that operating system.

However, the just concluded fourth-quarter of fiscal 2013 ushered some rays of hope as Research In Motion already launched its BlackBerry 10-based device, which get initial market traction. We believe that the new device coupled with effective cost management strategy may revive the company’s fortune going forward.

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