As expected, Research in Motion reported third-quarter earnings today that fell below its original forecast. For the quarter ending Nov. 30, the company reported adjusted income of $477.3 million, or 83 cents per share, on $2.78 billion in revenue. Analysts had been expecting earnings of 81 cents a share on revenue of $2.83 billion. Revenue was up 66.3% from $1.67 billion in the same quarter of last year.
Earlier this month, the company warned that it would miss its forecast for the quarter, placing the blame on "lower than estimated unit shipments of existing products, which RIM believes is a reflection of general economic weakness in the United States and shifts in product launch dates within the quarter." Translation: RIM and Verizon botched the launch of the Blackberry Storm, which was being called the iPhone killer, in late November and missed the chance for a boost to the quarter's numbers before the books closed.
What's interesting, as the company looks ahead for the fourth quarter, will be the return rate on the Storm, which has received some pretty rough reviews. Initially, the blogosphere had been reporting that the return rate was extraordinarily high as unhappy customers turned around and gave the device back. Now, Verizon has gone on the record to say that the return rate for the Storm is the lowest of any smartphone. In a statement, co-CEO Jim Balsillie said the company has strong momentum for the fourth quarter, calling it "our best ever start to the holiday buying season."
The company said revenue for the fourth quarter, which ends Feb. 28, 2009, is expected to be between $3.3 billion and $3.5 billion with EPS of 83 cents to 91 cents, exceeding Wall Street's expectations of $2.99 billion and 83 cents. Shares of Research in Motion initially jumped on the news, gaining as much as 10 percent in after-hours trading but re-adjusting to back closer to its regular-hours close of $38.44, a decline of more than 5 percent.
During the third quarter, RIM shipped 6.7 million devices, which accounted for about 81 percent of its revenue. It added about 2.6 million new Blackberry subscribers, bringing the total to about 21 million. RIM has actively been pursuing new consumer subscribers, marketing the devices to appeal to a younger, less-corporate crowd with things like sleek designs, colorful handsets and specialty applications. Balsillie said:
RIM launched an unprecedented number of BlackBerry smartphones in the third quarter and these new products are being adopted at an even faster pace than we expected. Our industry leading product portfolio is positioned well to capitalize on the increasing market opportunity in the fourth quarter of fiscal 2009 and beyond.
In a call with analysts today, the company called Q3 "a pivotal quarter with an ambitious number of products launched." Among them was the Blackberry Bold, which was launched with AT&T, but was largely a replacement product for existing Blackberry customers, instead of new additions.
Among new subscribers added during the quarter, about 60 percent were non-enterprise customers. Black Friday was a record day for the company - despite economic concerns - as it resulted in the highest number of net additions ever in a single day. Likewise, the company said that Nov. 21, the day that Verizon launched the Storm, represented the highest number of new subscription accounts in a single day.
The company also noted growth of pre-paid Blackberry services, mostly in Latin America and Asia, and said it is an area to watch for future growth in other areas. Finally, the company also highlighted its first developer's conference in Silicon Valley during the quarter and said it also released new tools for developers.