Research in Motion’s (RIMM) stakeholders can celebrate the fact that the company’s Q2 FY2013 adjusted loss of $0.27 per share ($142M) was less than the $192M incurred in Q1 2013. Its GAAP loss was $235M ($0.45/share), which was less than the $518M ($0.99/share) in the prior quarter. The company benefited from the absence of $335M in Goodwill impairments during the quarter. If we were to exclude the $335M in goodwill from Q1 losses, the company’s reported loss would have increased from $183M in Q1 2013 to $235M in Q2 2013. RIMM’s stakeholders should not read too much into the $84M in free cash flow generated in the quarter, because it was less than 50% of the $169M generated in Q1 2013. While linked quarter revenues increased by a staggering 2%, RIMM’s Gross Margin % declined from 28% to 26% in this period.
We are actually amazed that the overall BlackBerry subscriber base grew to 80M in Q2 2013 versus 78M in Q1 FY 2013 and 77M in Q4 FY 2012. However, RIMM saw a rapid decline in its BlackBerry smartphone shipment volumes from 10.6M in Q2 FY 2012 to 7.4M in Q2 FY 2013. The worse news for RIMM was that BlackBerry Playbook tablet computer volumes failed to see growth from last year, from 200,000 in Q2 FY 2012 to 130,000 Q2 FY 2013. These trends explain why RIMM saw a steep 31% decline in its revenue versus the comparable quarter last year. RIMM couldn’t cut operating expenses fast enough to offset this rapid revenue reduction, resulting in the company’s third straight quarterly loss from operations. Despite the fact that the BlackBerry has been in the market eight years longer than Apple’s (AAPL) iPhone, the iPhone sold 26M units in its most recent quarter, compared to 7.4M units for the BlackBerry smartphone. Furthermore, Apple’s iPad tablet computer sold 17M units in its most recent quarter, compared to 130K units for the PlayBook, even though the “brand-new” Playbook is $100 less expensive than the old Apple iPad 2.
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