Research In Motion Remains Neutral

Zacks

The beleaguered BlackBerry handset manufacturer Research In Motion Ltd. (RIMM) posted better than expected second quarter of fiscal 2013 financial results. Both the top and bottom line outpaced the Zacks Consensus Estimates. In the previous quarter, Research In Motion added net subscribers and its cash position improves sequentially. Management maintains its previous guideline that the BlackBerry 10 software-based smartphones will hit the market in the first calendar quarter of 2013.

The nightmare of Research In Motion continues ever since Apple Inc.’s (AAPL) iPhone hit the market. The situation aggravated once Google Inc. (GOOG) launched its Android software and several handset manufacturers adopted that operating system. Although we believe a real turnaround of Research In Motion will take more time than previously expected as we remain uncertain when the company will achieve profitability,the just concluded second-quarter of fiscal 2013 ushered some rays of hope as the market is eagerly waiting for the company’s next-generation Blackberry devices. We, thus, reaffirm our long-term Neutral recommendation on Research In Motion.

Research In Motion has initiated a headcount reduction in order to optimize its cost structure and has started benefiting from this restructuring process. The restructuring process will reduce its headcount by approximately 5,000 (about 30% of its present workforce) by the end of fiscal 2013. The headcount reduction will result into $1 billion of yearly cost savings. Furthermore, the Board of Directors has authorized a share buyback program of up to 5% of the company’s outstanding common shares. All these initiatives may improve the company’s bottom line going forward.

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