RIM Reports Preliminary Q3 Results – cuts outlook as subscriber growth slows

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Press Release

RIM today reported certain preliminary third quarter results for the period ended November 29, 2008 (all figures in U.S. dollars and U.S GAAP, except where indicated).

Based on preliminary financial data, RIM expects revenue for the third quarter to be in the range of $2.75-$2.78 billion. Preliminary revenue is lower than the previously forecasted revenue range of $2.95-$3.10 billion but is approximately 65% higher than revenue in the same quarter of last year. Approximately one third of the difference between forecasted and preliminary revenue is expected to be a result of the depreciation of certain foreign currencies relative to the U.S. dollar in the quarter. The remaining difference is primarily due to 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. Subject to final review, gross margin in the quarter is expected to be between 45-46%. The lower than expected gross margin is due primarily to product revenue mix and foreign exchange impacts within the quarter.

Diluted EPS for the third quarter is expected to be lower than the initial forecast of between $0.89-$0.97 per share diluted, primarily due to the lower-than-estimated revenue and the unfavorable impact of the strengthening U.S. dollar during the quarter. Subject to final review, RIM now anticipates diluted adjusted earnings per share to be in the range of $0.81-$0.83 which reflects the previously guided tax rate of approximately 29-30%. Adjusted earnings per share excludes a negative impact on RIM’s tax rate due to the significant depreciation of the Canadian dollar relative to the U.S. dollar in the quarter.(1) RIM’s GAAP financial statements will reflect an income tax rate of approximately 40-42% resulting in a diluted GAAP EPS for Q3 in the range of $0.67-$0.71. The adjusted earnings per share does not have any standardized meaning prescribed by GAAP and therefore is unlikely to be comparable to similar measures presented by other issuers. This non-GAAP financial measure should be considered in the context of RIM’s GAAP results.

RIM expects the number of net new BlackBerry® subscriber accounts added in the quarter to be approximately 2.6 million, which is lower than the 2.9 million previously forecasted but reflects a 57% increase over the same quarter of last year.

Despite the impact of later product launch dates and general economic weakness in the United States, customer response to the new BlackBerry products launched this quarter has been exceptional and RIM has experienced particularly strong momentum in recent weeks. Daily net subscriber account additions reached a record level on the day the BlackBerry Storm launched in the United States and RIM achieved a record number of weekly net subscriber account additions during the last week of the third quarter. The strong demand for new products has continued into Q4 and RIM is working closely with its partners to deliver sufficient product to take advantage of the growth opportunity in Q4 and beyond.

“Initial sales of new products have been very positive and we believe we have the strongest smartphone portfolio in the industry by far, however product launch timing, general economic conditions and foreign exchange volatility have tempered our results in the third quarter,” said Jim Balsillie, Co-CEO at RIM. “We believe RIM is well positioned to capitalize on the increasing smartphone market opportunity and we remain focused on driving growth in the fourth quarter of fiscal 2009 and beyond.”

RIM will report final third quarter results, provide guidance for the fourth quarter of fiscal 2009 and hold its quarterly earnings conference call on December 18, 2008 at 5:00 pm EST. The call can be accessed on the RIM website by logging in at www.rim.com/investors/events/index.shtml or by dialing 800-733-7571. A replay of the conference call will also be available at approximately 7 pm by dialing 416-640-1917 and entering passcode 21252987#. This replay will be available until midnight ET January 8, 2009.

(1) Note: The Company plans to report a tax provision in Q3 that is higher than previously forecast, the incremental portion of which is expected to be reversed in a future quarter. This provision reflects a tax rate that is significantly higher than the expected 29-30% tax rate guided on September 25, 2008, due to the unprecedented depreciation of the Canadian dollar in Q3 and its effect on RIM’s U.S. dollar denominated assets and liabilities held by RIM’s Canadian operating companies that are subject to tax in Canadian dollars. There are proposed changes to the existing Canadian laws that will allow RIM to calculate its fiscal 2009 Canadian tax expense based on the U.S. dollar (the Company’s functional currency). While the Company elected for Canadian tax purposes to adopt these rules in Q3, the Company cannot recognize the related tax benefit of electing to adopt these rules for U.S. GAAP financial reporting purposes until they are formally enacted resulting in the higher tax provision for Q3. Once these new rules are enacted, the incremental tax expense in Q3 will be reversed, additional tax benefits from prior quarters of fiscal 2009 will be realized and future tax rate volatility will be reduced. The Company expects the proposed rules to be enacted sometime in calendar 2009. As a result the Company believes that the presentation of diluted adjusted earnings per share provides useful information as to RIM’s operating results.

About Research In Motion (RIM)

Research In Motion is a leading designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, SMS messaging, Internet and intranet-based applications. RIM technology also enables a broad array of third party developers and manufacturers to enhance their products and services with wireless connectivity. RIM’s portfolio of award-winning products, services and embedded technologies are used by thousands of organizations around the world and include the BlackBerry® wireless platform, the RIM Wireless Handheld(TM) product line, software development tools, radio-modems and software/hardware licensing agreements. Founded in 1984 and based in Waterloo, Ontario, RIM operates offices in North America, Europe and Asia Pacific. RIM is listed on the Nasdaq Stock Market (NASDAQ:RIMM – News) and the Toronto Stock Exchange (TSX:RIM – News). For more information, visit www.rim.com or www.blackberry.com.

This news release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities laws, including statements relating to RIM’s revenue and earnings expectations for the third quarter of fiscal 2009, anticipated growth in subscribers, product shipments and expectations relating to RIM’s margin in the third quarter of fiscal 2009, and other plans relating to RIM. The terms and phrases “preliminary”, “anticipates”, “well positioned”, “continues”, “expected”, “ensure sufficient supply”, “growth” and similar terms and phrases are intended to identify these forward-looking statements. Forward-looking statements are based on estimates and assumptions made by RIM in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that RIM believes are appropriate in the circumstances including, but not limited to, general economic conditions, product pricing levels and competitive intensity, supply constraints and new product introductions. Many factors could cause RIM’s actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation: risks relating to the restatement of RIM’s previously-filed financial statements as a result of the internal review of RIM’s historical option granting practices, and regulatory investigations and litigation relating to those matters, including possible sanctions or penalties against the Company or its directors or officers; risks relating to RIM’s intellectual property rights; RIM’s ability to enhance current products and develop new products; RIM’s reliance on carrier partners, third-party network developers and suppliers; risks relating to the efficient and uninterrupted operation of RIM’s network operations center; risks related to RIM’s international operations; and intense competition. These risk factors and others relating to RIM are discussed in greater detail in the “Risk Factors” section of RIM’s Annual Information Form, which is included in its Annual Report on Form 40-F and RIM’s MD&A (copies of which filings may be obtained at www.sedar.com or www.sec.gov), and RIM’s other public filings with the Securities and Exchange Commission and Canadian securities regulators. These factors should be considered carefully, and readers should not place undue reliance on RIM’s forward-looking statements. RIM has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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