Is Wall Street Giving RIM (RIMM) the Benefit of the Doubt?
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Research In Motion (Nasdaq: RIMM) hit another milestone today, alas, still not a good one.
Currently, the stock is going for $7.50 or so, down 18 percent from Thursday's close following its dismal first-quarter 2013 numbers and outlook.
But, are investors giving RIM more credit than where credit is due? RIM is delaying its key BlackBerry 10 release until the first-quarter of calendar 2013 (the equivalent of its fourth-quarter 2013), but there are no guarantees that will happen given several delays already being implemented in the process. (Side note: what if it's already done, but RIM isn't releasing it due to lack of developer support?)
From generating cash of $195 million in last year's quarter, RIM reporting burning through a net of $60 million. That's actually down from a decrease of $264 million the prior quarter, assuming some of the cost-savings efforts were taking hold.
It's closing 70 percent of its external manufacturing sites, streamlining corporate structure, cutting management, and eliminating 5,000 more jobs. In total, costs associated would be $350 million through its fiscal 2013 reporting year.
What does that mean? Going back to RIM's fourth-quarter, it already reported a $1.5 billion drop in sales to $18.44 billion. The very heart of every other aspect on its balance sheet is already bleeding over expected cost savings. Looking to RIM's 2013, analysts see revs of $12.5 billion, falling to $11.84 billion the next year.
One shiny spot was net cash flow increasing to $2.25 billion from $2.11 billion last quarter. As noted above, RIM burned through another $60 million in cash meaning the gain came from short-term investments, which added $471 million (from $247 million the prior quarter).
Goldman Sachs also made an interesting point: hardware gross margin was negative 10 percent, versus 1 percent at Motorola in 2008, 6 percent at Palm in early 2009, and Nokia (NYSE: NOK) at 16 percent last quarter. Given that RIM will need to keep discounting in order to retain its 30 million to 35 million user base over the next half-year, that margin will surely multiply.
So, at $7.50 per share and 524.16 million outstanding shares, the market says RIM's market cap should be $3.931 billion. But, say you take out $1.938 billion in cash and short-term investments and that market cap drops to $1.993 billion, or $3.80 per share. Add long-term investments to cash and market cap drops to $1.68 billion, or $3.21, about 57 percent below today's price.
Assuming cost-cuts take hold and cash drops to $750 million by December, then market cap might be $2.431 billion, or $4.63, within the next half year.
Finally, the top three things analysts said RIM has going for it are: retaining its customer base, BB10, and the Playbook.
Currently, the stock is going for $7.50 or so, down 18 percent from Thursday's close following its dismal first-quarter 2013 numbers and outlook.
But, are investors giving RIM more credit than where credit is due? RIM is delaying its key BlackBerry 10 release until the first-quarter of calendar 2013 (the equivalent of its fourth-quarter 2013), but there are no guarantees that will happen given several delays already being implemented in the process. (Side note: what if it's already done, but RIM isn't releasing it due to lack of developer support?)
From generating cash of $195 million in last year's quarter, RIM reporting burning through a net of $60 million. That's actually down from a decrease of $264 million the prior quarter, assuming some of the cost-savings efforts were taking hold.
It's closing 70 percent of its external manufacturing sites, streamlining corporate structure, cutting management, and eliminating 5,000 more jobs. In total, costs associated would be $350 million through its fiscal 2013 reporting year.
What does that mean? Going back to RIM's fourth-quarter, it already reported a $1.5 billion drop in sales to $18.44 billion. The very heart of every other aspect on its balance sheet is already bleeding over expected cost savings. Looking to RIM's 2013, analysts see revs of $12.5 billion, falling to $11.84 billion the next year.
One shiny spot was net cash flow increasing to $2.25 billion from $2.11 billion last quarter. As noted above, RIM burned through another $60 million in cash meaning the gain came from short-term investments, which added $471 million (from $247 million the prior quarter).
Goldman Sachs also made an interesting point: hardware gross margin was negative 10 percent, versus 1 percent at Motorola in 2008, 6 percent at Palm in early 2009, and Nokia (NYSE: NOK) at 16 percent last quarter. Given that RIM will need to keep discounting in order to retain its 30 million to 35 million user base over the next half-year, that margin will surely multiply.
So, at $7.50 per share and 524.16 million outstanding shares, the market says RIM's market cap should be $3.931 billion. But, say you take out $1.938 billion in cash and short-term investments and that market cap drops to $1.993 billion, or $3.80 per share. Add long-term investments to cash and market cap drops to $1.68 billion, or $3.21, about 57 percent below today's price.
Assuming cost-cuts take hold and cash drops to $750 million by December, then market cap might be $2.431 billion, or $4.63, within the next half year.
Finally, the top three things analysts said RIM has going for it are: retaining its customer base, BB10, and the Playbook.
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