Today's Top Tech Stories: RIM and Netflix Crash, and Microsoft Makes a Tablet Move
The Nasdaq index pulled up sharply today, closing up 1.34%. However, good market vibes didn't ripple across the entire tech industry, with a couple of notable companies struggling today. Here are three of the top technology stories that have developed over the past 24 hours.
Tech News No. 1: RIM's woes continue
Research In Motion (NAS: RIMM) stepped up to the earnings plate after the market closed and delivered a big whiff. Shares are down nearly 20% in after-hours trading.
The company had already done its best to temper expectations for the quarter when it issued light guidance three months ago. Turns out that even that outlook was optimistic. Research In Motion forecasted sales between $4.2 billion and $5 billion but was able to deliver only $4.17 billion. Profits were within the company's guidance, but only on the extreme low end.
Both sales and profits were well below analyst estimates. Sales fell by 10% compared with last year, while GAAP profits were down 59%. As a cruel comparison, Apple (NAS: AAPL) saw a sales boost of 82% while profit soared 125% in its most recent quarter.
RIM investors know the foreseeable future remains challenged. The company's much-touted iPad challenger, the TouchPad, shipped only 200,000 units and looks to be down on the mat. It'd take a miracle to turn around tablet efforts at this point. Smartphone sales came in 1.3 million units below guidance, too.
However, the company is also bargain-priced, and guidance for the quarter points to roughly flat year-over-year sales performance, a notable improvement from this quarter's 10% sales decline. That could point to a stronger uptake of the company's newly refreshed line of Blackberry 7 smartphones.
As far as my investing dollar goes, I have concerns about the company's shrinking gross margin. That illustrates a continuing inability to gain traction on phones with higher selling prices. With a management team that's lost nearly every shred of credibility, I don't place much credibility in guidance, either.
Sure, RIM shares are selling on clearance. But I'd rather buy a great company like Apple on sale rather than going bargain shopping for a rudderless company with clueless leadership like RIM.
Tech News No.2: Are Netflix's problems just beginning?
Netflix (NAS: NFLX) was another major loser in technology today. The company guided down its U.S. subscriber total for the current quarter from 25 million to 24 million. Shares closed the day down nearly 19%.
A 19% haircut might seem pretty weighty for such a small change to subscribers. However, Netflix is a stock that's long been priced for perfection. Even after losing 44% of its value in the past few months, Netflix still trades for about 43 times earnings. Because of this lofty valuation, any signs of slowing growth were bound to crush its stock.
In the end, there's little doubt Netflix is entering a dangerous time. Amazon.com (NAS: AMZN) is aggressively expanding its streaming service, Google (NAS: GOOG) is eyeing a purchase of Hulu, and DISH Network (NAS: DISH) is working on a Blockbuster streaming service. In addition, content costs are escalating at an alarming rate; talks recently broke down between Netflix and Starz after the two sides couldn't agree on a plan to extend their licensing partnership, even though Netflix was reportedly willing to up the yearly licensing fees it pays Starz tenfold.
However, the company is also on the verge of several major opportunities such as its overseas expansion. Netflix is in the process of rolling out its service to Brazil and 43 other Latin American countries.
Tech News No.3: Applause for Microsoft's tablet
Microsoft (NAS: MSFT) is hosting its BUILD conference in San Francisco this week, and Windows 8 is front and center. The company is hoping to finally make progress on its decade-long ambition of expanding Windows to the tablet form factor.
Initial reviews are very positive, but Microsoft is refusing to peg down a release date for the product, even though a release later in 2012 is speculated. If any ideas prove especially compelling, that'll give competitors such as Apple and Google plenty of time to plan their responses.
I'll take a wait-and-see approach on Windows 8 -- if for any reason just because Microsoft has never managed to create a compelling tablet version of Windows. In addition, most of the same pundits assuming Windows 8 tablet dominance were the same who predicted iPhone and iPad failure. Tech commentators still haven't quite gotten a grasp on consumer buying habits in a mobile world where simplicity and easy-to-use interfaces are preferred to "do everything" devices.
That's it for today's tech recap. To stay apprised, add any of the major companies mentioned here to our free My Watchlist service today:
- Add Research In Motion to My Watchlist.
- Add Netflix to My Watchlist.
- Add Microsoft to My Watchlist.
- Add Apple to My Watchlist.
At the time this article was published Eric Bleeker owns shares of no company listed above. You can follow Eric on Twitter to see all of his technology and market commentary. The Motley Fool owns shares of Google, Microsoft, Apple, and Research In Motion.Motley Fool newsletter serviceshave recommended buying shares of Microsoft, Google, Netflix, Apple, and Amazon.com, buying puts in Netflix, and creating bull call spread positions in Apple and Microsoft. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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