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Last updated: February 11, 2009 10:15 pm
Research in Motion, manufacturer of the BlackBerry family of smartphones, warned on Wednesday that its fourth quarter profits could fall on the low end of forecasts in spite of growth in subscriptions.
In December the company said expected fourth quarter revenue to reach $3bn to $3.5bn compared to analyst estimates of about $3bn. It predicted fourth quarter earnings to fall between 83 cents and 91 cents a share. At that time RIM reported a 7 per cent rise in net income in the third quarter to $396.3m, or 69 cents per share. Revenue rose to $2.78bn from $1.67bn.
On Wednesday RIM blamed “a variety of factors” for why subscriber growth was outperforming revenue and earnings performance in the fourth quarter. It pointed to product mix, lowered channel inventory levels and an increased ratio of new subscriber sales to upgrade and replacement sales, as customers cling to older devices in favour of buying new ones.
“Some of the legacy products are suffering,” said Matthew Thornton, analyst at Avian Securities.
The Ontario-based company said it expects new subscriptions to be up by 20 per cent in the fourth quarter from the 2.9m new subscriptions it forecasted in December. It added 2.6m new accounts in the last quarter. Although subscriptions are growing, analysts say that rising unemployment could impact the number of people using BlackBerry devices.
“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 timeframe and the challenging economic environment,” said Jim Balsillie, RIM’s co-chief executive said in a statement.
The company’s recent product launches, including the touch-screen-based BlackBerry Storm, have been well received but Wednesday’s warning highlighted that RIM, like many of its rivals, is not recession proof. RIM has pushed deeper into the consumer market over the past 18 months, introducing devices such as the Pearl and Curve aimed beyond the corporate user. Although that has broadened its potential customer base it has also made the company more susceptible to seasonal shopping habits and changing consumer sentiment.
The popularity of new devices such as the Storm, Mr Thornton said, has led telecoms companies to pull back on orders for older models. Meanwhile the growing subscriptions, largely due to the Storm, will do little to bolster profits this quarter.
Shares of RIM plunged by 15.35 per cent to close at $60 on Wednesday. RIM’s shares reached a high of nearly $150 on Nasdaq last June.
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