RIM shares fall, despite soaring earnings
Published: 26 Sep 2008 10:39 BST
For the second consecutive quarter, soaring earnings were not enough to satisfy RIM investors who are worried about the prospects of lower profits to come.
RIM reported its second-quarter results on Thursday, posting an 88 percent jump in revenue and a 72 percent jump in net income compared to last year. The figures — $2.58bn (£1.41bn) in revenue and $495.5m in net income — were roughly in line with the company's own expectations, but slightly below those of financial analysts.
However, RIM revealed that its gross margins will be lower than usual for the next several quarters as it introduces new products that are slightly more expensive to build than its current models.
In addition, the US launches of the BlackBerry Bold and the BlackBerry Pearl Flip will occur slightly later in the RIM's third quarter than the company had expected earlier in the year, meaning they will contribute less to this quarter than RIM had anticipated.
That news sent RIM's stock down around 20 percent in after-hours trading as investors digested the news.
RIM's gross margins are fairly solid, at around 50 percent, but they are heading down into the mid-40s as the company starts building the more expensive handsets in large volumes.
However, on a conference call following the release of RIM's results, co-chief executive Jim Balsillie appeared not to be worried about his company's prospects heading into the rest of the year.
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Balsillie described the current market for smartphones as a "land grab" and said RIM would regret missing out on the opportunity to take advantage of demand for smarter mobile phones if it wasn't willing to take a cost hit through more sophisticated hardware and increased marketing expenses.
During the upcoming quarter, the BlackBerry will be the centrepiece of several so-called 'hero' campaigns launched by partners, presumably carriers and software developers, Balsillie said.
"Everyone has a hero campaign where we are a featured or the featured device for the holiday season," he said.
RIM has been trying to expand its footprint beyond the enterprise to consumers, the target for devices such as Apple's iPhone. Consumers currently make up 42 percent of RIM's subscriber base, but more than half of all new subscribers in the second quarter were consumers, Balsillie said.
BlackBerry sales were roughly in line with what Wall Street analysts had expected, at 6.1 million units shipped, but below some of the more optimistic estimates.
Credit: RIM shares tank on lower profits for new BlackBerrys from CNET News
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