Updated with premarket prices
The BlackBerry maker whiffed on the top and bottom line. In premarket trading Thursday, shares of Research In Motion were down 5% to $70.03. The stock closed at $73.97 in the regular session Wednesday before the earnings release.
The sub-par performance earned RIM a sharp downgrade to sell from Goldman Sachs early Thursday.Weighing on the numbers was a surprisingly weak phone shipment total for the most recent quarter. RIM shipped 10.5 million devices, far fewer than the 11 million expected. RIM says the lower device shipments in the most recent quarter were due to an "inventory reduction" at a phone company. It wouldn't be a wild guess to figure that much of that so-called adjustment came from Verizon (VZ) where the BlackBerry Storm 2 has not been selling well. The weakness also translated to a lower average selling price for each phone, or ASP. The company told analysts on the call that the average selling price per phones will drop to between $305 and $310 in the current quarter. That is below the $311 RIM was collecting on the average phone in the most recent quarter. The drooping ASP and unit shipments point to a continued difficulty for RIM to gain market share in smartphones, as touchscreens grow in popularity. RIM expects to address this weakness in the coming months. "I can't talk about what's not announced," Co-CEO Jim Balsillie said on an earnings call with analysts. "If you saw the road map, you'd be blown away," he added. RIM posted adjusted earnings, excluding special items of $1.27 a share, up from the 90 cent pro forma profit in the year-ago quarter but a penny shy of analyst estimates calling for profit of $1.28. Sales for the fiscal fourth quarter ended Feb. 27 were $4.08 billion, up from the $3.46 billion last year but well below analysts' target of $4.31 billion. RIM says it shipped 10.5 million devices in the quarter, a big shortfall compared with the 11 million or more Wall Street anticipated. And the average selling price per phone -- an area where some analysts had concerns -- fell to $311, and far below the $320 the company had previously forecast. Competition from Apple's (AAPL - Get Report) iPhone and Google (GOOG) Android phones seem to have made BlackBerries a tougher sell in the U.S. On a sunny note, RIM was able to widen gross margins to 45.7%, an improvement from the 42.7% in the prior quarter and better than the 43.3% the street was expecting. "We are off to a great start in fiscal 2011 and expect strong shipments, revenue, subscriber and earnings growth in the first quarter," Balsillie said in a press release Wednesday. Looking ahead, RIM says it expects a profit in the current quarter ending in May to be between $1.31 and $1.38 a share in the range of $4.25 billion and $4.45 billion. The midpoint of that guidance is earnings of $1.35 on $4.35 billion in sales. Analysts were expecting profits of $1.22 a share on $4.33 billion in revenue. --Written by Scott Moritz in New York