The crisis at Research In Motion Ltd. (TSX: RIM) continued on Friday as investors in Toronto and New York reacted negatively to the BlackBerry maker’s second quarter financial report.
Shares of the company tumbled over 20 per cent to close at $23.50 on the Toronto Stock Exchange, with a similar 19 per cent drop also felt on the NASDAQ. About 9.8 million shares changed hands throughout the day on the TSX in a major stock selloff.
The panic felt across the two financial markets was caused by disappointing second quarter results, which RIM released on Thursday evening.
Read more about the crisis at RIM
The Waterloo, Ont.-based smart phone maker announced its net earning had dropped 58 per cent to US$329 million for the three month period ending on Aug. 31. Revenues dropped by 15 per cent to 4.2 billion.
To compare, the company made a profit for $797 million on revenue of $4.62 billion in the same quarter of last year.
BlackBerry PlayBook shipments also took a nose dive as the company shipped just 200,000 tablets compared to the 500,000 it shipped in Q1 when the device hit the market.
After making the announcement, RIM co-CEO Mike Lazaridis referred to the company’s recent seven phone BlackBerry 7 release, which he called the “largest and most successful launch in our history.”
The BlackBerry 7 OS is widely seen as a lame duck platform, which is designed to transition the company to its new QNX-based OS set to debut early next year.
“BlackBerry 7 has a lot of runway,” said Jim Balsillie, co-CEO at RIM. “We believe it can carry us through a transition to QNX-based smart phones.”
Despite the show of confidence from RIM’s top executives, many financial analysts have cut their price targets for RIM shares.
Still, at least one financial analyst put a positive spin on the numbers.
Gus Papageorgiou, the managing director of technology research at Scotia Capital, said RIM is adding roughly 4.8 million subscriptions a quarter, which is not too far off the record 5.1 million subscriptions they added in Q3 of last year. BlackBerry subscriptions have reached 70 million, he said, with the company adding 14 million subscriptions over the last three quarters.
“RIM shipped 10.6 million (BlackBerry devices) meaning they are draining channel inventories,” he wrote in an e-mail. Carriers and retailers sold 13.7 million BlackBerry smart phones during the quarter, Papageorgiou added.