RIM profit surges; Growth disappoints

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Research In Motion Ltd. reported a 57 percent jump in its second-quarter profit on Wednesday as surging demand for its popular BlackBerry wireless e-mail device drove sales higher. But its stock fell in after-hours trading as customer additions and forecasts for subscriber growth disappointed some investors, offsetting an increase in the company’s third-quarter sales forecast. RIM shares fell almost 4 percent to $74.35 on the electronic Inet brokerage system from their close of $77.25 on Nasdaq. The stock closed down 49 Canadian cents at C$90.42 in Toronto.


“I think it was the initial blush on subscriber numbers. That’s what caused the stock to sell off,” said Peter Misek, an analyst with Canaccord Capital.

RIM said during the quarter an additional 620,000 subscribers began using the thumb-operated BlackBerry, which helped popularize wireless e-mailing. Its subscriber base is now 3.65 million, more than double the 1.657 million users of a year earlier. But this was at the low end of the company’s forecast for second-quarter subscriber additions of between 620,000 and 650,000. RIM said it expects to add 680,000 to 710,000 subscribers in the third quarter, and between 775,000 and 825,000 in the fourth.

“The sub number was at the low end of the guidance. And the sub number for next quarter, they hadn’t given guidance, but expectations were higher than what they ended up with,” said one New York-based analyst.

“Subscribers are the core driver. If the sub number isn’t there, then eventually the other things aren’t going to be there either.”

But Co-chief executive Jim Balsillie said company’s growth prospects were strong, noting an additional 25 phone companies began offering the BlackBerry in the quarter, bringing its total to about 150 carriers worldwide.

“The actual gross and net (additions) were really quite good given the tough summer season, and quite frankly we’re introducing a lot of new products mid-quarter,” he told Reuters in an interview.

RIM reported net income rose to $111.1 million, or 56 cents a share, in the quarter ended August 27, from $70.6 million, or 36 cents per share, a year earlier. Adjusted to exclude an inventory writedown and other items, RIM said its net income was $120.2 million, or 61 cents a share. Revenue at the Waterloo, Ontario-based company rose 58 percent to $490.1 million.

Analysts had expected a profit of 61 cents a share before exceptional items, on revenue of $487.1 million, according to Reuters Estimates. RIM had forecast second-quarter revenue of between $465 million to $490 million and adjusted earnings in the range of 57 to 63 cents. RIM increased its revenue forecast for the third quarter to a range of $540 million to $570 million from a range of $525 million to $550 million.

It maintained its forecast for adjusted third-quarter earnings per diluted share of 62 to 68 cents. Analysts forecast a third-quarter adjusted profit per share of 66 cents on revenue of $545 million. RIM introduced a fourth-quarter forecast for revenue of $590 million to $620 million and adjusted earnings in the range of 74 to 81 cents per diluted share. This compared with analyst expectations of a fourth-quarter adjusted profit of 72 cents a share on revenue of $584.2 million.