Thursday, September 25, 2008

RIMM: Gross Margins Under Pressure

RIMM shares are down 12 points to 85.50 after reporting earnings that missed by a penny (.86 cents vs. street at .87 cents). Revenues were in-line at 2.58 billion. For the second quarter in a row, RIMM saw clear pressure on their gross margins. Q3 gross margin guidance of 47% is well short of most analysts which are around 50%. RIMM also sees Q3 EPS of .89-.97 cents compared to consensus of .98 cents. The range is very wide and likely reflects the economic uncertainty and the potential for additional pricing pressure. Not a good report and I remain bearish on tech stocks primarily due to the gross margin compression that seems to be pervasive across the sector.

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