RIM projects lower profits, margins despite subscriber growth

Research In Motion projected margins and earnings for its fiscal fourth quarter at the low end of its previously announced forecast despite predicting stronger subscriber growth.

The BlackBerry maker said it expected revenue for the quarter, which ends Feb. 28, to come in around the midpoint of the previously predicted range, with gross margin and earnings at the low end. In December, RIM projected revenue between $3.3 billion and $3.5 billion and margins of 40 to 41 percent.

RIM also said it expected BlackBerry subscriber growth to be 20 percent higher than the 2.9 million it had predicted in December, up from 2.6 million in its fiscal third quarter, on the strength of continued growth after the holiday shopping season. However, the lower margins and earnings could forebode a drop in sales of some of RIM's newer, more high-end smartphones such as the Storm and the Bold and an increase in demand for older and less expensive models. The company said it expected "more normalized" growth in the fiscal first quarter.   

"RIM achieved a very strong start to the holiday buying season and the momentum carried on stronger than expected during the past seven weeks, despite a seasonally slower time frame and the challenging economic environment," said co-CEO Jim Balsillie.

Despite the growth in market share for the company, RIM has faced growing competition from Apple's iPhone 3G, and may face more competition from a renewed Palm if its Pre smartphone proves to be a hit.

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Correction, February 11, 2009: Due to an an editing error, an earlier version of this article misstated the new projected BlackBerry subscriber growth as 2.9 million.