Are BlackBerries out of season?
A Merrill Lynch analyst questions whether one of RIM's resellers has too many of its BlackBerry e-mail pagers in inventory.
  BlackBerry: Only for the elite? |
Merrill Lynch analyst Virginia Syer Genereux said in a research note Thursday that Aether Systems has enough of RIM's 957 handheld to last the next several quarters.
RIM shares dropped as much as 10 percent Thursday before recovering somewhat. In late afternoon trading, the stock was down $1.14, or 4 percent, to $30.09.
"For us, the new news from (this week's conference) call was that Aether said it does not have a firm shipping schedule or commitment with RIM," Genereux said.
RIM Chief Financial Officer Dennis Kavelman took issue with that contention, noting that Aether has agreed to purchase 87,000 BlackBerry pagers this year.
"As far as we're concerned we have orders in the system for Aether," Kavelman told CNET News.com. The purchase orders that are already placed are firm commitments, he said, while Aether does have more flexibility to delay some of the longer-term commitments.
Kavelman added that overall demand for the BlackBerry remains "very strong" and pointed out that Aether is just one of many companies that resells the Blackberry.
However, Genereux said in the research note that Waterloo, Ontario-based RIM could end up missing her revenue estimates for the quarter ending Aug. 31.
"We think our August numbers could be at risk if Aether completely shuts off as a channel, as the company's (conference) call suggested it might," Genereux said.
Genereux added that she has been expecting sales through Aether to account for 20 percent of BlackBerry shipments in RIM's March-to-May and June-to-August quarters. Owings Mills, Md.-based Aether sells a variety of handheld products and wireless data services to corporations.
RIM is not the only handheld maker to see its inventory swell. Handheld maker Palm expects more than $200 million in additional inventory to pile up this quarter amid a slowdown in consumer demand.
In regard to the parallel drop in U.S. corporate tech spending, Kavelman said earlier this month that the company is counting on its expansion into Europe, as well as a separate effort to make BlackBerry pagers compatible with Lotus Notes, to help the company keep growing.
In an April filing with the Securities and Exchange Commission, Aether said it is "committed to purchase 87,050 RIM handheld devices" during its fiscal year. However, Aether indicated this week it has some flexibility.
Aether spokesman Greg Abel said the company is not contractually obligated to take more pagers from RIM but can do so if there is enough customer demand. In its earnings release this week, Aether also took a charge for obsolete inventory including excess stock of RIM's older 950 model.
Both Genereux's estimate and the First Call consensus estimate is for RIM to earn 5 cents per share for the quarter ending May 31, with revenue of about $76 million. Genereux said those numbers are probably attainable, with March sales having come in relatively strong. The August quarter could be another story, she said.
Genereux said her estimate of $82 million in revenue for the August quarter assumes RIM will get $8 million to $9 million from Aether.
"We think RIM has purchase orders in-house from Aether," she said, "but it is conceivable, based on Aether's comments, that these could be pushed back."
Last month, RIM co-CEO Jim Balsillie said his company has not seen a large drop in demand.
"This sector slowdown is mythical," he told CNET News.com after the company's earnings release April 11. "We didn't see a slowdown in demand. And as a result, we're reiterating guidance for the quarter and the year...We remain cautiously optimistic immediately, but we expect to hit a home run this year."