RIM: We "don't fret" new competition; reports solid Q1, outlook

RIM: We "don't fret" new competition; reports solid Q1, outlook

Summary: updated: Research in Motion reported better than expected first quarter earnings Thursday, but revenue fell just short of expectations. Meanwhile, the company delivered a solid outlook for the next three months.

TOPICS: BlackBerry, Banking

updated: Research in Motion reported better than expected first quarter earnings Thursday, but revenue fell just short of expectations. Meanwhile, the company delivered a solid outlook for the next three months.

The BlackBerry maker reported first quarter earnings of $643 million, or $1.12 a share, up from $518.3 million, or 90 cents a share a year ago (statement, preview). Adjusted for various expenses, RIM reported earnings of 98 cents a share. Wall Street was expecting 94 cents a share.

RIM said its sales for the quarter were $3.42 billion, up 53 percent from a year ago, but shy of the $3.5 billion expected by Wall Street. Meanwhile, units and subscriptions were slightly disappointed. Simply put, investors expected too much and sold shares after hours.

Why the reaction? Here's a look at expectations going into the earnings report:

And what RIM actually reported.

  • The company shipped 7.8 million devices. That was in line with estimates, but a few analysts expected more.
  • RIM reported 3.8 million net new BlackBerry subscriber accounts for a total of 28.5 million.
  • The company claimed 55 percent market share in smartphones and Jim Balsillie, Co-CEO at RIM, said he expects to expand BlackBerry's move into new markets.
  • Revenue for the second quarter is expected to be $3.45 billion to $3.7 billion with gross margins of roughly 43 percent to 44 percent. Earnings are expected 94 cents a share to $1.03 a share. Wall Street is currently expecting RIM to report second quarter earnings of 99 cents a share on revenue of $3.67 billion.

updated: On a call with analysts today, the company fielded questions about the competitive forces in smartphones, notably Apple's $99 price point on an iPhone and the arrival of the Palm Pre. In his reply, Balsillie said "we don't fret" over what others are doing. It's too early for the Pre to say what sort of impact it might have, he said. In addition, the $99 iPhone is a limited time price to reduce inventory of an older model, he said, and RIM has been aggressive in pricing and promotions for current products - such as the Buy One, Get One Free promo for the Blackberry Storm.

He also spoke briefly about applications and new tools that developers have at their disposal to develop apps, specifically the ability to "push" content through apps, similar to how the original Blackberry pushed email to the device. During the quarter, there were close to 15 million downloads of social networking apps, the most popular of which were MySpace and Facebook. Both offered updated apps during the quarter.

Finally, the company projected new subscriber additions of 3.8 million to 4.1 million in the second quarter, up from the first quarter. The company noted that the quarter is seasonally slow but that new products, including the new Tour, are expected to help drive growth. It expects to ship 8.1 million to 8.7 million units, up from this 7.8 million in the first quarter.

Topics: BlackBerry, Banking

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  • Time will tell...

    ...how the smartphone market plays out. Is there room for multiple
    players making a decent profit? There should be. No one company has
    to lose for others to win. There are plenty of companies that compete
    in multiple product categories and yet still make a decent living off it.

    The latest news on Palm's Pre is that it is not attracting users from
    outside of Sprint. That, along with the cracked screens that are being
    reported, and a price that is twice that of an iPhone, could prove
    troublesome for them. They don't have the money to keep going, they
    need a hit that keeps on selling.

    RIM reported some good numbers. How long can they sustain their
    'buy one get one free' offer before it starts to affect margins? And
    how many will they sell once that promotion stops? How many would
    they have sold if that promotion didn't exist?

    The iPhone 3G S is generating good reviews and Apple is slowly
    adding more and more features that businesses demand. In a year or
    so, they might have a competent entry in the business market and
    then it will really get interesting between RIM and Apple.

    We're lucky to be watching all this smartphone competition in its
    infancy, years from now some of these players might not be around.
    Heck, I still remember as a child all the great toy companies I loved;
    Ideal, Aurora, Marx...thought they'd be there forever!
  • $99 iPhone

    I am under the impression that the $99 price point for the iPhone
    3G is not "promotional, rather a repositioning of the original iPhone
    3G as lower cost option for consumers. If It is a permanent price
    reduction I am surprised basillie would not know this. It is one
    thing not to fret over what the competition is doing, it's another
    thing all together to be completely oblivious to what they are doing.
    Of course I could be wrong, and the $99 price point is only
  • Biased reporting or a misunderstanding?

    Investors sell on future earnings, not because they "expected too
    much". According to CNBC, RIM missed projected sales and
    subscriptions and had to lower their projections going forward.
    They did not report anything that could be interpreted as being
    solid. That's why the stock was down up to 5% after hours.

    I wonder why this blog tried to spin it for RIM...stockholder