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Research in Motion (RIMM)
Research in Motion Misses Q2 Expectations
Smartphones are definitely replacing standard cell phones at a rapid pace. Blackberries and iPhones are two of the leaders of the pack, so it's easy to assume that the popularity of these products would keep earnings in positive territory. The latest results from Research in Motion painted a much different picture. The company reported adjusted earnings, excluding one-time items, of $1.03 a share for its fiscal second quarter. Sales came in at $3.53 billion and missed analysts' expectation of $3.62 billion. If blackberries are so popular, why are sales coming in below expectations? Could Research in Motion be facing more pressure from Apple and Google's Android?
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Whether you like a sleek touch-screen or a QWERTY keyboard device, Research in Motion usually has a product that would be right for you. At one time, blackberries dominated the smartphone market. Now that consumers have a wealth of options to choose from, Research in Motion is slowly being pulled down from its pedestal. One of the issues hurting the company's sales is the declining price of their products. As more new and cheaper smartphones get introduced into the market, Research in Motion is being forced to cut prices to lure customers back in. Even as the company sells more devices than in previous periods, its average selling prices has continued to head downwards each quarter. RIM is now expecting the average selling price of a BlackBerry to slip to $320, compared with $345 in the second quarter and $357 in the first. RIM co-CEO Jim Balsillie is hopeful that the introduction or a new set of higher priced devices will help eliminate this issue in future quarters. This actually may end up hurting sales more if users turn away from blackberries for cheaper devices. Let's not forget that consumers are not quite ready to jump back into frivolous spending this soon after a recession.
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Another plaguing problem for Research in Motion is the growing pressure from Apple (AAPL: Charts, News, Offers) and Google (GOOG: Charts, News, Offers). The popularity of the iPhone has started to convert some blackberry users as they seek out a better operating system and cool applications. 30 million iPhones have been sold since its debuted in July 2007, so it's clear why Apple is posing a threat to growth at Research in Motion. Now the company has to worry about Google. Companies are starting to get on board with Google's Android operating system and that just means more competition for RIM.
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Investors are not sure what to think about the company's future. This is the second straight quarter of declines for the blackberry maker. Goldman Sachs (GS: Charts, News, Offers) cut its rating on the stock to “neutral” from “buy,” citing doubts about the company's ability to maintain market share in North America. Brokerage firm Raymond James also cut its rating. It looks like RIM has its work cut out as it tries to reclaim the throne that it once had. As the popularity of smartphones continues to grow, there will be enough room at the top for companies that are committed to providing their users with the latest technology at reasonable prices so RIM has got to step up its game.
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Other Views on Research in Motion
BlackBerry Cobbler, Anyone? -- Investors are trying to make blackberry cobbler following the disappointing report from Research in Motion.
Patent Payoff Sours Earnings -- Maybe this patent settlement sent earnings south.
Video -- RIMM Earnings Reaction
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