TORONTO Research In Motion is likely to prove this week that it's much easier to install a new chief executive than it is to turn around a struggling company in his first quarter at the helm.
Most investors and analysts aren't expecting much improvement from the company that makes the BlackBerry smartphone and the PlayBook tablet since Thorsen Heins replaced Mike Lazaridis and Jim Balsillie in January.
Indeed, most have their sights set low, both for the quarter that ended March 3 and the outlook for the current three-month period. Little joy is expected at least until RIM launches its make-or-break next-generation phones later in the year.
"It's going to be a weak quarter," said JMP Securities analyst Alex Gauna. "It's going to continue to amplify fears" that RIM will at some point find itself spending more than it's making, he said. "I'm not sure they lose money this quarter, but I think it'll signal that that's the ultimate trajectory."
Heins has inherited a difficult situation to say the least. The smartphone maker's shares have tanked in the past year in the face of intense competition, a string of profit warnings, a service outage and the stumbling launch of the PlayBook a year ago.
Canada's RIM, which mastered mobile email early and once dominated out-of-office corporate communication, has struggled to match Apple's iPhone and an army of devices using Google's Android operating system, both of which first won over consumers and now increasingly impinge on RIM's base of corporate users.
The drum beat of bad news was unlikely to have slowed in the Christmas period, analysts warned, despite heavy U.S. marketing to promote the latest BlackBerry phones and a software upgrade and sharp discounts for its poor-selling PlayBook tablet.
SHORT INTEREST RISE
RIM is expected to barely reach the bottom end of its own lackluster BlackBerry shipment and earnings-per-share forecasts and to point to more of the same in the current quarter.
The Waterloo, Ontario-based company has delayed an overhaul of its smartphone lineup until late 2012, giving investors little to look forward to until then.
"It would be nice to see them having a positive outlook and things progressing very well with BlackBerry 10," said Wedbush analyst Scott Sutherland, referring to the future handsets that will share the operating system RIM first used in the PlayBook.
"But given the past disappointments of product cycle misses, most of us won't believe it until we see it," he added.
Highlighting the pessimism, short interest in RIM's Nasdaq stock jumped to more than 60 million shares, roughly 11 percent of RIM's outstanding shares, as of March 15. It was at 37.5 million at the end of 2011.
Short-sellers profit by borrowing shares they believe will drop, selling them, buying them later at a lower price to repay the loan and pocketing the difference.
Both Gauna and Sutherland said the only reason short-sellers may have to scramble to cover their bets is if Heins announces a radical restructuring or shift in strategy that would reawaken dormant takeover speculation.
EARNINGS CUT IN HALF
Analysts, on average, expect RIM to earn 81 cents a share on revenue of $4.54 billion, according to Thomson Reuters I/B/E/S.
That would be less than half what it earned a year earlier and a roughly $1 billion drop-off in sales. Earnings for the current quarter, which began in early March, are seen at just 66 cents a share on revenue of $4.26 billion.
RIM is expected to have shipped 11.2 million BlackBerry devices, according to a Reuters poll of 10 analysts, scraping in to the low-end of the company's own dismal outlook, and just 300,000 of its PlayBook tablets. Both numbers are set to fall in the current quarter, the poll showed.
Even if RIM hits the high end of its Christmas quarter shipment target, it will ship fewer BlackBerrys in this fiscal year than the previous one, the first decline ever.
SHIPMENTS SEEN FALLING FURTHER
Worse, evidence is mounting that RIM's strongest weapons in the smartphone war - its traditional user base of office workers and its growth in developing countries - are losing momentum.
The company's share of the global smartphone market fell to 8.8 percent in the fourth quarter, according to research firm Gartner, down from 14.6 percent a year ago.
Several U.S. government agencies have said they will remove the RIM servers that run their fleets of BlackBerrys or issue rival devices to their workers, as have a string of corporates.
The company spent some $100 million in the quarter on a marketing campaign which sought to pique interest for its latest touchscreen BlackBerry 7 devices in the United States.
Despite the promotional push, RBC Capital Markets analyst Mike Abramsky expects shipments there to fall by a third from the prior quarter. For the rest of the world he expects a 15 percent decline.
RIM reports fourth quarter earnings after the close of trade on Thursday. Its shares were trading just above $14 on Tuesday morning, down some 80 percent from a peak near $70 in February last year.
(Editing by Frank McGurty)