RIM's revenue jumps 37%, but outlook disappoints

Research In Motion reported solid revenue growth in its fiscal second quarter, which ended Aug. 29. However, the BlackBerry maker's profit took a hit from a settlement charge related to a patent dispute with Visto. Further, the firm's guidance for the coming quarter sparked investor unease.

The company reported quarterly net income of $475.6 million, down from $495.5 million in the year-ago quarter. The company's legal charge in the quarter was $112.8 million, and without that, RIM said that it would have had a net income of $588.84 million. In July, RIM agreed to pay mobile email vendor Visto $267.5 million for a license on all Visto patents and the transfer of certain Visto intellectual property.

RIM said that it scored $3.53 billion in revenues in the quarter, up 3 percent from $3.42 billion in the previous quarter and up 37 percent from $2.58 billion in the year-ago quarter. Devices made up 81 percent of RIM's revenue. During the quarter, RIM shipped 8.3 million devices, up from the 7.8 million it shipped in the previous quarter and up markedly from the 6.1 million it shipped in the year-ago quarter.

The company activated 3.8 million new BlackBerry subscriber accounts in the quarter--the same as the previous quarter--for a total subscriber base of around 32 million. RIM also improved its gross margin sequentially to 44.1 percent, up from 43.6 percent in the previous quarter but down from 50.7 percent in the year-ago quarter.

RIM co-CEO Jim Balsillie hinted at BlackBerry momentum going into the holiday shopping season, thanks to an "impressive product portfolio." The company is widely expected to release the BlackBerry Storm 2 for Verizon Wireless as well as other new BlackBerry devices for a variety of carriers. On the company's earnings conference call, Balsillie said that RIM had cut the price of some its devices in anticipation of newer ones coming to market. Further, he said the company plans a major advertising push to coincide with the critical holiday shopping season.

However, RIM's stock dove almost 10 percent in after-hours trading immediately following the release of the company's numbers, to around $75 per share, and continued to fall the morning after the company's announcement. Analysts and investors were disappointed with RIM's fiscal third quarter revenue forecast, which was lower than expected. Expectations had been high, with RIM's stock up 27 percent since July.

Genuity Capital analyst Deepak Chopra told the Wall Street Journal that the outlook could mean that RIM's carrier partners are not refilling BlackBerry inventories at the pace some had predicted.

"It doesn't appear that carriers are building up inventories, and that's hampering hardware shipments," he said.

For more:
- see this WSJ article [1] (sub. req.)
- see this Bloomberg article [2]
- see this release [3]

[5]