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RIM Co-CEO Displays Confident Front

RIM Co-CEO Displays Confident Front

Research In Motion Ltd. (RIMM) shipped a record number of devices in its fiscal first quarter, but that wasn’t enough to allay fears that the BlackBerry maker is losing ground in the fast-growing smartphone market.

RIM shipped 11.2 million devices in the quarter–an increase of 43%– and reported share earnings of $1.36, up from $1.12 a year earlier and ahead of estimates for $1.34. But revenue came in at $4.24 billion, up from $3.42 billion a year earlier, but below the mean analyst estimate for $4.355 billion.

Subscriber additions of 4.9 million also came in slightly below expectations and the average selling price, or ASP, of the BlackBerry continued to fall, slipping to $299 in the latest quarter from $311 in the prior quarter.

“There’s going to be a slight disappointment that RIM’s revenue and hardware shipments are at the low end of guidance,” said Canaccord Genuity analyst Deepak Chopra. “However, earnings continue to grow and when RIM launches it’s new operating system and related hardware it will begin an upgrade cycle in their core markets and narrow the software gap with iPhone and Android.”

During RIM’s earnings call late Thursday, RIM co-Chief Executive Jim Balsillie said the company will be introducing two new products either late in the current quarter or early in the third quarter. The timing of the releases could affect RIM’s forecasts, including revenue and average selling price, he said. However, ultimately, the devices will help drive growth and improve RIM’s competitive position in North America, which has been hurt by intense competition from Apple Inc.’s (AAPL) iPhone and a slew of devices running on Google Inc.’s (GOOG) Android-operating system.

The introduction of tiered-pricing plans by carriers will also help spur growth, Balsillie added.

Balsillie didn’t confirm plans for a hybrid device consisting of a touch screen and slide-out keyboard, something that is widely anticipated by the Street. He did say that the upcoming products and underlying operating system amount to a “quantum leap” over what is currently available in the smartphone market. “I just wish I could wind the clock forward a few weeks,” he said. “I couldn’t feel better.”

Balsillie said RIM’s international business continues to grow “very, very well.” International sales, the main driver of growth for RIM in recent quarters, now accounts for 40% of the company’s overall subscriber base. He also said RIM’s online application store, BlackBerry App World, is generating 1 million downloads per day. The next-generation of App World will offer carrier and credit card billing, he said.

The BlackBerry platform remains the platform of choice for corporate smartphone users, Balsillie said, noting that a number of corporate customers recently evaluated alternative solutions but abandoned these efforts and reaffirmed their commitment to the BlackBerry.

This was a key quarter for RIM, as investors question its ability to keep pace in a sector that has already claimed smartphone pioneer Palm Inc. and humbled Finnish giant Nokia Corp. (NOK). RIM’s stock is down about 20% since it reported tepid fourth-quarter results March 31.

No stranger to competition, RIM is in its biggest battle yet, squaring off against the iPhone juggernaut and the popular Android system. The rival devices boast slick touch-screen technology, speedy Web browsers and easy access to a flood of third-party applications–all things that the BlackBerry lacks.

The iPhone 4, the latest version of the popular device, went on sale Thursday and is expected to help Apple make further inroads in the key North American smartphone market. The device may also help Apple consolidate its foothold in the corporate smartphone market, once an impregnable BlackBerry stronghold.

RIM isn’t standing still. It’s readying a new, more user-friendly, version of its BlackBerry operating system and several new BlackBerry models, expected to include the first ever touch-screen BlackBerry with a slide-out keyboard. A tablet device may also be in the works, as RIM is unlikely to forfeit that market to Apple and other tablet-computer makers.

Gross margin in the first quarter was 45.4% compared with the company’s forecast of 44.5%.

For the second quarter, RIM’s guidance is for revenue of $4.4 billion to $4.6 billion and earnings of $1.33 to $1.40 a share. The mean analyst estimate is for net of $1.31 on revenue of $4.499 billion.

The company projects gross margin of about 44%.

RIM also said Thursday that it plans to buy back about 31 million shares.

-By Stuart Weinberg; Dow Jones Newswires; 416-306-2026; stuart.weinberg@dowjones.com
(Carolyn King in Toronto contributed to this article.)

[Thanks: http://online.wsj.com]

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