Research In Motion expected to post losses, but BlackBerry-maker could surprise

TORONTO – After several months of technical setbacks, layoffs and an eroding market share, BlackBerry-maker Research In Motion could get a mild reprieve from its compounding troubles on Thursday when it issues its second-quarter financial report.

But analysts say that if investors heave a sigh of relief, it won’t be because RIM delivered a home run, but simply because the bad news, and its quarterly losses, didn’t worsen as much as expected.

“The stock has fallen so far that any slight bit of good news is going to be good for (it),” said Neeraj Monga, an analyst at Veritas Investment Research Corp.

Considering the Waterloo, Ont.-based company’s perilous situation, what defines “good” is relative.

This year, RIM has watched its market share in North America dramatically fall to about four per cent as the BlackBerry became an afterthought in the face of Apple’s iPhone and the Samsung Galaxy S3.

And while other companies debuted new devices, RIM was forced to push the launch of its BlackBerry 10 operating system and new phones into next year, missing the crucial back-to-school and holiday shopping seasons.

The company has also made significant reductions across its operations, closing facilities, severing ties with certain manufacturers and announcing plans to lay off 5,000 workers across its global operations in an effort to save $1 billion by the end of its fiscal year.

Analysts would certainly be pleased if RIM delivered second-quarter results which show that its operating losses weren’t as deep as expected.

Expectations peg the company’s loss to be equal to 47 cents per share, according to a poll of analysts by Bloomberg.

It would also be considered positive if RIM showed that it isn’t burning through its $2.2-billion cash reserve as quickly as some analysts expected.

Even more certainty around the launch of the much-delayed new BlackBerry smartphones could move the stock.

“We think shares will largely trade based on prospects for Blackberry 10,” said Bill Kreher, a technology analyst for Edward Jones in St. Louis, Mo.

That leaves a lot of room for a gut reaction from investors when RIM reports after market close on Thursday.

This week, the company’s shares moved higher after chief executive Thorsten Heins surprised analysts with an improvement in the number of subscribers to its services.

Heins said the company’s user base grew to about 80 million at the end of its second quarter, up from 78 million in the previous quarter, a surprise to analysts who had widely expected RIM’s subscriber base to falter in the quarter.

RIM’s stock (TSX:RIM) rose 38 cents to close at $6.88 on Wednesday at the Toronto Stock Exchange.

The value of those new subscribers is still in question, as RIM has refocused its efforts to marketing lower-priced handsets, mostly in developing countries, which will negatively affect its average selling prices.

“Swapping high-value developed markets subscribers for prepaid subscribers in Africa and emerging markets doesn’t seem like a strategy for long-term success,” said Peter Misek, an analyst at Jeffries & Co., in an email.

He expects about 6.5 million BlackBerry phones were sold in the second quarter, while sales will erode to six million in the third quarter.

Revenues are pegged at $2.5 billion for the quarter, Misek said.