Research In Motion Ltd. promise third-quarter income that drop tangency of analysts’ projections, a formalise the BlackBerry maker may hump to sell many phones at berth prices to contend with Apple Inc.’s iPhone.
Research In Motion fell the most in a year in Nasdaq trading after saying revenue this quarter will be $3.6 billion to $3.85 billion. Analysts on average estimated $3.91 billion.
The company has cut prices of some products as it prepares to release new BlackBerrys later this quarter, co-Chief Executive Officer Jim Balsillie said yesterday on a conference call. RIM is up against rival devices from Apple and Palm Inc., both of which have lowered prices in the past few months, and a raft of planned phones based on Google Inc.’s Android software.
“If you want to go mainstream, you have to be competitive with the market and lower prices,” said Steven Li, an analyst at Raymond James Ltd. in Toronto. He cut his rating on the stock to “market perform” from “outperform”. “It’s clearly the lower average selling price that drove the sales miss.”
RIM, based in Waterloo, Ontario, fell $14.15, or 17 percent, to $68.91 at 4 p.m. New York time on the Nasdaq Stock Market, the biggest drop since Sept. 26, 2008. The shares have gained 70 percent this year.
About 88.4 million shares changed hands today, more than six times the daily average in the past three months.
Simona Jankowski, an analyst at Goldman Sachs Group Inc., lowered her rating on RIM today to “neutral,” saying she doubts the company will maintain its market share in North America. She set a 12-month share price target at $73, down from a six-month target of $96. Four months ago, Goldman Sachs had added RIM to its outperforming stocks list.
Sales Driver
Higher-priced new versions of the BlackBerry Storm and Bold aren’t going to come until later this quarter, which ends Nov. 28, so that won’t help average selling prices much in the period, Li said. Cupertino, California-based Apple cut the price of its older iPhone 3G in half to $99 in July. Sunnyvale, California-based Palm, which released its Pre phone in June, reduced the price $50 this month to $149.99 and said it plans to introduce a cheaper device later this year.
The BlackBerry Curve 8520, among the lower-priced products in RIM’s smart-phone portfolio, is available at Wal-Mart Stores Inc. for $48.88 with a two-year service contract with T-Mobile USA Inc.
“Gross sales are really what is going to drive these stocks forward,” said Michael Yoshikami, chief investment strategist at YCMNet Advisors, which manages about $850 million in Walnut Creek, California. “You simply cannot just continue to get efficient, you have to grow your business, and that’s clearly what RIM missed on,” he told Bloomberg Television.
