RIM's bullish talk fails to sway Wall Street

Shares plunge 10% as investors ignore rosy full-year forecast, focus on disappointing quarterly guidance

Just when Research in Motion could have used some good news to prime the market for the introduction of its PlayBook tablet computer, the Canadian BlackBerry smartphone maker dropped a disappointing quarterly forecast Thursday that hammered shares in after-hours trading.

(Also see: Marketing isn't RIM's big problem)

After rising 1.97, or 3.2 percent, to 64.09 in regular trading, RIM's stock (NASDAQ: RIMM) plunged more than 12 percent to as low as 56.00 in the extended session.

This, despite the company reporting earnings for its fiscal fourth quarter (ended Feb. 26) of $934 million, or $1.78 a share, up 32 percent over net income of $710 million, or $1.27 a share, in the year-ago quarter. RIM also reported a 36 percent increase in Q4 sales to $5.56 billion from $4.08 billion a year ago. (Though Q4 revenue was up a paltry 1.1 percent from third-quarter sales of $5.5 billion.)

And while RIM's Q4 earnings topped analyst estimates of $1.75 a share, revenue fell short of the $5.65 billion Wall Street forecast.

That's not the miss that pounded the stock after hours, however. It was the forecast for the current quarter ending in May, with RIM predicting revenue of $5.2 billion to $5.6 billion and earnings of $1.47 to $1.55 a share. Analysts were calling for sales of $5.67 billion in fiscal Q1, with per-share earnings of $1.65.

As MarketWatch quoted analyst Matt Thornton of Avian Securities, “The May quarter guidance is not good. It’s bad, and it’s surprising.”

Then there's the issue of RIM's PlayBook, which is slated to debut April 19. If what co-CEO Jim Balsillie said in the earnings conference call Thursday afternoon is true -- “we certainly have substantial internal forecasts” -- why not throw Wall Street a bone and issue some PlayBook sales guidance? But the company is keeping whatever numbers it has to itself.

Balsillie said RIM is “bullish on the company and its prospects for this fiscal year,” forecasting earnings per share of $7.50, which is 9.9 percent above analyst estimates of $6.82 a share. It's interesting that RIM is throwing out a specific long-term EPS when it's clearly not sure how well the PlayBook will be received in the market in the short-term. Would anyone really be surprised if that full-year forecast is revised downward in May?

No doubt Balsillie is correct when he says RIM is going through "a very, very heavy transition" as it tries to reverse a downward trend in smartphone market share (particularly in the U.S.) and races to catch up in a tablet market dominated by Apple's iPad and attracting numerous other competitors, many of which already have devices in stores.

It all adds up to a giant question mark that will continue to weigh down shares until RIM can prove to investors that it's on the right track. It won't be easy.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

ITWorld DealPost: The best in tech deals and discounts.
Shop Tech Products at Amazon