RIM revenue, profit sharply higher

Summary

RIM earned $796.7 million in net income during their second quarter ended August 28 in 2010. The previous year, they earned $475.6 million in profit. The company added 4.5 million new Blackberry smart phone users and shipped 12.1 million devices. The revenue earned amounted to $4.62 billion, slightly better than the analyst expectations of $4.5 billion. The company is pleased with the results and the momentum of this quarter is expected to carry over as new products such as the Blackberry Torch are introduced. The company is expecting revenue amounts ranging from $5.3 billion to $5.5 billion the following quarter.

Connections

RIM earned $796.7 million in net income which is reported as an increase in the operating section in the cash flow statement. The accounts following the net income are either deducted or added to the net income to give the total amount of cash earned or lost from operating activities. RIM’s inventory certainly decreased their cash flow because of the company’s rapid growth, adding 4.5 million new users of their devices and 5.4 million new subscribers as well. With an increased amount of customers, the company would have to compensate for this growth by purchasing even more inventory. The cash on hand would therefore be decreased. This would be recorded in the operating section as a decrease in cash flow.

Reflections

This article was written around 6 months earlier. Some information I compiled from the more recent articles I found gives a better representation of the company’s performance at this point in time. RIM’s most recent quarterly report states that the company earned $934.4 million in net income, a healthy increase from the $796.7 million reported in this article around six months earlier. The Blackberry Torch was a released as RIM’s response to Apple’s iPhone back in the summer of 2010. The device however, did not fare too well against its opponent. Despite the disappointing sales of the company’s newly anticipated Blackberry Torch, the company still managed to post an increase in its net income. With that being said, RIM will be having a hard time improving their sales in the next few fiscal periods. The company’s new and heavily anticipated Playbook tablet should see a similar result as the Blackberry Torch. The Playbook will be given the daunting task to compete against Apple’s iPad 2, which already has $2.5 million sales in the month of March. RIM’s new Playbook will have a hard time competing against Apple’s popularity. RIM should look to improve on marketing to increase their success against Apple.

http://www.cbc.ca/news/business/story/2010/09/16/rim-results-quarterly.html