RIM Sees Q4 Strength, Vows To Remain Carrier-Aligned

Joseph Palenchar -- TWICE, 12/18/2009

Toronto - BlackBerry maker Research In Motion exceeded its third-quarter forecasts, attributing the advances to new products, smartphones' growing market share, its growing consumer focus, and increasingly aggressive retailer and carrier efforts that included two-for-one deals from Verizon Wireless and Sprint.

RIM exceeded its September forecasts for device shipments, net subscriber activations, revenues and earnings for the fiscal quarter ending Nov. 28.

The company also forecast continuing momentum into its fiscal fourth quarter and vowed to remain aligned with carriers at a time of "a lot of turbulence in the channel," said co-CEO Jim Balsillie. Because of changing device platforms and applications strategies, Balsillie said, "Some carriers are feeling quite concerned about how they maintain their relevance." RIM, he said, wants "to be an agent of that relevance for them ... entrenching it and extending it in a value-added way." RIM, he continued "represents an element of consistency and alignment with the carrier." Although RIM "can't force love," he said, "we're consistent in our alignment, we're consistent with our commitment to their prosperity, and generally they respond positively to that."

Also to keep its momentum going, RIM is talking to carriers about tiered pricing plans to expand RIM's total addressable market. The first such plan from a major U.S. carrier is T-Mobile's first prepaid Blackberry plan.

For its fiscal third quarter, the company posted a 41 percent gain in year-over-year revenue to $2.92 billion and a 59 percent gain in net income to $628 million, with quarterly device shipments worldwide exceeding 10 million for the first time. The company's net new subscriber activations rose 70 percent to 4.4 million year over year and rose sequentially by 16 percent. More than 80 percent of the net new subscribers were non-enterprise subscribers, the company noted of its growing consumer adoption.

For the fiscal fourth quarter, RIM forecast net new subscriber additions of 4.4 million to 4.7 million, compared with the third quarter's 4.4 million, and device shipments of 10.6 million to 11.2 million, compared with the third quarter's more than 10 million. Gross margins were forecast to rise to 43.5 percent, up sequentially from the third quarter's 42.7 percent, because of efforts to reduce its bill of materials and growth in higher-margin markets outside North America. Third-quarter margins were in line with company forecasts but were down sequentially from the second-quarter's 44.1 percent and the year-ago quarter's 45.6 percent.

Sixth-three percent of revenues in the third quarter came from North America.