RIM said that its second-quarter net income fell by 58.7 percent to $329 million, or 63 cents a share, from $797 million, or $1.46 a share, in the same quarter a year ago. Revenue fell by 10 percent to $4.2 billion, an amount greater than analysts had expected.
“We question the company’s long-term viability,” said Bill Kreher, an analyst with Edward Jones. “The clock is ticking.”
By every other measure, RIM performed poorly. Its gross profit margins dropped to 38.7 percent from 44.5 percent a year ago. Cash and cash equivalents are down 52 percent from the previous quarter while inventories more than doubled, mostly because of unwanted PlayBook tablets.
RIM shipped 10.9 million BlackBerry phones, about one million fewer than analysts had expected. The company’s newest product, the BlackBerry PlayBook tablet computer, fared even worse. RIM shipped about 200,000 of the devices to stores, fewer than half of what analysts had expected.
As a result RIM shares lost as much as 19 percent of their value in after-hours trading that followed the company’s announcement on Thursday. Shares closed in regular trading at $29.54, down 0.6 percent.
In a conference call with analysts, Jim Balsillie, RIM’s co-chief executive, blamed sagging sales of RIM’s aging line of smartphones for much of the discouraging financial news. RIM recently introduced seven phones. But they are largely updates of its old product line rather than new devices matching the performance and features of Apple’s iPhone or various handsets that use the Android operating system from Google.
Mr. Balsillie said the new phones, collectively known as BlackBerry 7 for their operating system, have “received an excellent reception.” He called one model, the Bold 9900, “a thing of beauty to behold,” sentiments Mike Lazaridis, the other RIM co-chief executive, repeatedly echoed. Independent reviews have also been largely positive. But only two new BlackBerry models were available in North American and British stores during the final three weeks of the quarter, making it difficult to assess their appeal.
Several analysts said that many BlackBerry users may be waiting until next year to replace their handsets. RIM has said it plans to release radically different phones based on an entirely new operating system known as QNX, which is now only found in the PlayBook.
The company, however, has not made it any clearer when that will happen. Mr. Lazaridis said that prototypes of those phones “will be available in the not too distant future” but neither he nor Mr. Balsillie would offer any information about when shoppers could buy the devices.
While the flaws that plagued the PlayBook at its introduction last spring seem to have been resolved, the device is still hobbled by a relative lack of apps, a shortcoming Mr. Lazaridis acknowledged in the conference call.
While RIM, based in Waterloo, Ontario, did not disclose how many of the devices were purchased by consumers, Mr. Lazaridis acknowledged that many are sitting on store shelves. RIM says it hopes to sell those devices by offering rebates and software improvements.
He said RIM will display at a trade show next month a revamped version of the operating system that overcomes the greatest shortcoming of the PlayBook, its inability to directly receive BlackBerry e-mail. As he was with the new phones, however, he was vague about when the software would be available.
Mr. Lazaridis said that RIM would also open an online video store for the PlayBook. While the powerful processor in the device makes it adept at playing video, streaming movies and television programs onto it can be frustrating.
Ted Schadler, an analyst with Forrester Research, said that even with those changes, the PlayBook is unlikely to be a big seller for RIM.
“These guys can’t sell to consumers,” Mr. Schadler said. He advises corporate clients that the PlayBook is not the best tablet for sales and presentations, he said. The iPad is better, he said.
Analysts’ lack of faith in RIM’s future is also heightened because they see the company falling farther behind the competition until whenever the QNX phones appear. Apple is expected to release the iPhone 5 next month. Google’s recent purchase of Motorola may result in new products, and Nokia will begin offering its first phone that use Windows Phone 7 software well before the QNX-based BlackBerrys appear.
While RIM was forced to lower its forecast shortly after announcing its first-quarter results three months ago, the company is sticking by its financial projection for the rest of the year.
Mr. Balsillie said that he expected strong sales of the BlackBerry 7 phones over the holiday buying season that would get it back on track.
But Mr. Kreher said he expected that the company may have to change its forecast for a second time this year, and several analysts on the conference call did not seem to share Mr. Balsillie’s optimism.
Mike Abramsky, of RBC Captial Markets, challenged the company’s forecast, saying to Mr. Balsillie, “I’m just wondering why you feel that confident.”
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