RIM cuts expectations amid weak BlackBerry sales

Research In Motion warns it will not hit expectations for the fiscal first quarter due to weak BlackBerry sales and a mix of lower-priced products.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
3 min read

Research In Motion today lowered its profit forecast for the fiscal first quarter amid weak shipments of its BlackBerry devices, signaling that the company is feeling increasing pressure from competitors.

In the quarter ending in May, RIM said it expects earnings between $1.30 and $1.37 per share. Analysts had expected RIM to report earnings of $1.48 per share. RIM also said it expects revenue to come in slightly below its previous guidance of between $5.2 billion and $5.6 billion.

RIM blamed the earnings and revenue shortfall on weaker-than-anticipated shipments of its BlackBerry phones. The company also said that more of its sales have shifted toward lower-cost handsets.

RIM has been struggling to compete against Apple's iPhone and Google Android devices for several quarters. And its market share has been slipping, particularly in the U.S. where the company tends to sell high-end smartphones. Meanwhile, competitors, such as Apple and Android have gained ground.

Also today market research firm NPD group reported that RIM's BlackBerry OS share in the smartphone OS market dropped to 14 percent of sales, down from 19 percent the previous quarter. Eating into those numbers was Apple, with iOS jumping 9 points. Apple now has 28 percent of smartphone sales. Google Android took 50 percent of the smartphone market in the first quarter of 2011.

Earlier this month co-CEO Jim Balsillie brushed off doubts that RIM has lost its edge in the market to competitors. Instead, he emphasized RIM's focus on international markets.

"We have been rapidly expanding our business in 180 countries," he said during a launch party for the new RIM Playbook tablet. "We have been focusing on the other 93 percent of the global market. We do need great products in the U.S., but this is a global business."

But the emphasis on emerging markets appears to be putting pressure on the company. While the U.S. is not the only market for smartphones, it does offer an opportunity to sell higher-priced devices. RIM's strategy to focus more on providing products outside the U.S. seems to be reminiscent of a strategy adopted by Nokia several years ago.

Nokia almost entirely pulled out of the U.S. market and focused its efforts overseas, including in developing countries where it became a leader in offering low-cost cell phones. While Nokia still remains the worldwide leader in mobile handsets, its lead has slipped in the past couple of years. And the company this week laid off some 7,000 employees as it tries to reboot its strategy and get back into the high-end smartphone business.

Analysts have noted for more than a year that RIM has failed to adequately address the U.S. smartphone market with devices that consumers want. Specifically, it has not addressed the touch-screen market very well. Neither the Storm, nor the follow-on Storm 2, nor the BlackBerry Torch--which has a slide-out keyboard and touch screen--have been hits for the company.

But RIM's co-CEO Balsillie has promised that new devices are on their way. The company plans to make several announcements at the upcoming BlackBerry World conference, from May 3 to 5 in Orlando, Fla., he said.

Some of the new devices could include the first touch-screen BlackBerry Bolds, which are code-named the BlackBerry Dakota for the GSM version and the BlackBerry Montana for the CDMA version. There's also talk of a new Storm 3, code-named the BlackBerry Monaco Touch.

The big question will be whether the new devices will be enough to help revive the company as competition in the smartphone market heats up with Google Android, Apple, and Microsoft Windows Phone 7 also looking for bigger pieces of the overall pie.

Shares of RIM were briefly halted after hours. When trading resumed, its shares dropped about 9 percent, according to CNNMoney.