RIM upbeat despite drop in profits
Published: 19 Dec 2008 11:13 GMT
RIM's third-quarter results were slightly disappointing, as expected, but a strong holiday season is giving the company reason to be very optimistic.
The company had already revealed that it expected third-quarter revenue and profit to be lighter than originally expected, and the official numbers released on Thursday were in line with those revised expectations, at $2.8bn (£1.9bn) in revenue and net income of $396.5m.
Adjusting for the tax complexities involved with RIM's Canadian base of operations and its heavy US presence, earnings per share of 83 cents were a penny ahead of analyst estimates polled by Thomson One.
However, in a press release, RIM said that "we have enjoyed our best-ever start to the holiday buying season over the past few weeks", owing to the recent launches of the BlackBerry Storm and Bold. As such, RIM provided guidance well above what analysts were expecting for the upcoming quarter.
RIM now expects revenue of $3.3bn to $3.5bn and earnings per share of 83 cents to 91 cents during the current quarter, far exceeding analyst estimates of $3bn in revenue and earnings per share of 83 cents.
Product delays that hurt RIM's third-quarter results are giving it cause for celebration in the fourth quarter, said Jim Balsillie, co-chief executive of RIM, on a conference call on Thursday afternoon. The Storm is doing particularly well, he said, setting a single-day record for new BlackBerry subscribers during the day it went on sale.
The company said it is having trouble keeping up with demand for the Storm, reviews of which were lukewarm. Rumours have been circulating this week that RIM and Verizon, the exclusive US carrier of the Storm, have been dealing with a high rate of returns for that device, but a RIM spokesman denied those rumours on Thursday, saying: "The Storm has the lowest return rate of any of our PDAs and, at this point in its life cycle, it has the lowest return rate of any PDA we currently sell."
RIM's priority over the past year has been to diversify its customer base away from enterprise customers toward consumers, and progress is being made: 45 percent of RIM's BlackBerry customer base is now consumer-derived, Balsillie said.
Balsillie was not asked how his products were faring against the iPhone 3G, the main competitor to RIM's devices. Apple is expected to sell around 6.4 million iPhones worldwide during the October to December period, while RIM shipped 6.7 million BlackBerry devices worldwide from September to November, and expects to sell between 7.5 million and eight million units in the current three-month period.
RIM's gross margins are declining as sales of the new models accelerate but, at around 40 percent, they are still healthy. Balsillie promised to wring cost savings from the products as volumes grow.
Credit: RIM Q3 as expected, but confidence is soaring from CNET News
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