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RIM announces strong quarter as iPhone 3GS ships
Published: 19 June, 2009
Tags >> RIM | iPhone
RIM announced strong quarterly results, but investors were nervous about its cautious outlook, jitters that were probably not calmed by the fact that one of RIM's greatest challengers, the new iPhone 3GS, went on sale the day after its report.
The BlackBerry maker sold 7.8m phones in its fiscal first quarter, and reported revenue of $3.42bn, in line with analyst expectations, and up 52% on the year-ago period. Excluding special charges related to tax liabilities concerning stock options, and a one-time boost from a change in tax rules, net income was $564.4m, or 98 cents a share. The analyst consensus had expected 94 cents per share.
RIM added 3.8m new BlackBerry subscriber accounts during the quarter, slightly below the 3.9m of the previous quarter. The details of this trend gave early hope that the Canadian vendor is delivering on its promise to extend its business in the consumer sector, since 80% of its new accounts came from outside its traditional enterprise market.
Looking ahead to the results for the current quarter, in which the Palm Pre and iPhone 3GS have shipped, RIM was just about meeting analyst forecasts, expecting revenue between $3.45bn and $3.7bn (the low end of expectations) and earnings per share between 97 cents and $1.03. This disappointed investors, who were hoping for a more bullish outlook.
Co-CEO Jim Balsillie tried to downplay the likely impact of the two new phones from its main rivals in the crossover enterprise/consumer space. He pointed to RIM's wider range of devices, its new software strategy (which seeks to make the handset into the 'fourth screen'), and some aggressive promotions and discounts from cellcos, such as Verizon's 'Buy One, Get One Free', which continues in the current quarter.
As the iPhone 3GS hit US stores, AT&T backed down on pricing for upgrades - a move UK customers will be hoping O2 will emulate. The US exclusive carrier will now offer the 3GS at new customer prices even to existing iPhone subscribers, rather than imposing hefty penalties for early upgrades. AT&T initially said that current iPhone 3G owners would have had to pay $399 for the 16Gb version and $499 for the 32Gb version.
Another lure for the 3GS is better Wi-Fi performance, mainly because release 3.0 of the operating system supports auto-authentication for iPhone users connecting to AT&T hotspots. This allows customers to switch seamlessly between HSPA and the hotspot without being prompted.
Meanwhile, shares in Sprint Nextel and Palm fell on a research note by analyst Jennifer Fritzsche of Wachovia Securities, which said the new Pre was doing little to attract new customers to Sprint and that most buyers were existing subscribers. By contrast, a high proportion of iPhone adopters throughout the life of AT&T's exclusives have been poached from other cellcos. Sprint stock fell 33 cents, or 6.1%, to $5.11, its biggest drop since May 13.
