RIM's BlackBerry Winter
Troy Wolverton
12/21/05 - 07:20 AM EST
Research In Motion (RIMM Quote) is slated to discuss its fiscal third-quarter results later Wednesday, but the two topics at the forefront of investors' minds likely won't be the company's sales or earnings for the period.
Instead, analysts and shareholders are more likely to focus on a couple of issues that will have more bearing on the company's future: its ongoing patent dispute with holding company
NTP and the outlook for subscriptions to its BlackBerry email service.
The Ontario-based company did not field questions from analysts after
lowering projected subscriber growth numbers last month, says David Schamens, a partner with Invictus Funds.
But recently on Wall Street, expectations that the company will finally settle its long-standing dispute with NTP have run high.
"My guess is -- and I'm sure everybody else is thinking the same thing -- that they're going to address the issue of a settlement" with NTP, says Schamens, who is negative on RIM's long-term outlook, but whose firm has no current position in RIM. "If there's nothing definite, I think people are going to be really hard on management."
Both issues are salient for investors for what they could bring to bear on RIM's stock price. The patent dispute with NTP could result in RIM being barred from offering its BlackBerry service in the U.S., its biggest market, or a settlement in the neighborhood of $1 billion.
Although the company has said that disappointing short-term subscriber growth won't affect expected results in the near term, continued subpar yearly subscriber numbers likely will.
At least on the income statement, RIM is expected to report a strong quarter. Analysts polled by Thomson First Call have predicted that RIM will post a profit of 65 cents a share for the just-completed quarter on $549.2 million in sales.
In September,
the company predicted that it would earn 62 cents to 68 cents a share in the quarter on sales ranging from $540 million to $570 million.
In the same quarter last year, the company earned $90.4 million, or 46 cents a share, on sales of $365.9 million.
And Wall Street is looking for similarly healthy results in the company's fiscal fourth quarter. Analysts expect the company to earn 75 cents a share in the current period on $602.8 million in sales.
RIM predicted in September that it would post a fiscal fourth-quarter profit ranging from 74 cents to 81 cents a share on sales of between $590 million and $620 million.
In the fourth quarter last fiscal year, RIM lost $2.6 million, or 1 cent a share, on $404.8 million in sales. The loss was attributable to the company's recognition in the quarter of the costs of a later-aborted settlement with NTP and a tax gain the company also recorded.
Excluding those factors, the company would have earned $140.1 million, or 71 cents a share.
But revenue and earnings aren't everything. Indeed, in many ways outside of its likely income statement, this last quarter has been a poor one for RIM.
During the quarter, the company suffered a series of setbacks in its dispute with NTP, most recently when
a federal district judge rejected the company's efforts to have him enforce an aborted settlement between the two companies and to delay any further proceedings while the U.S. Patent and Trademark Office reviews NTPs patents.
The federal court is now preparing to hold hearings on how much money it should assess RIM in damages for violating NTP's patents and on whether to reinstate an injunction that would bar RIM from offering its BlackBerry service in the U.S.
Investors have long worried about the patent dispute, but RIM has given them something else to fret about over the last quarter in the form of subscriptions. Last month the company said it expected its subscriber numbers to be 8% lower than expected in its third quarter and 3% lower than expected in the fourth.
Company officials blamed the disappointing growth on delays in shipping two new BlackBerry devices, but some analysts have suggested that the trouble is more due to growing competition.
Strengthening the bears' case was the company's subscriber report for last quarter. In the company's fiscal second quarter, subscriber growth came in at the low end of projections.
And if the number of subscribers RIM purged last quarter is included -- which the company dismissed as a "one-time event" -- net subscriber growth came in far lower than expectations.
The problems have weighed on the company's shares, which also had a bad quarter and a bad year. The shares are off 19% since late September, when the company last reported earnings, and are off 24% in the year to date.
They ended Tuesday's regular session off 93 cents to $62.08 and lost 28 cents in after-hours trade.
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