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RIM outlook disappoints, sending shares lower

By Wojtek Dabrowski
/ Source: Reuters

By Wojtek Dabrowski

TORONTO (Reuters) - Research In Motion offered investors an outlook on Thursday that fell short of some expectations, sending the BlackBerry maker's stock sliding 5 percent even as the company reported a higher quarterly profit that topped forecasts.

The share price's drop may reflect concern over a competitive landscape that has become more cluttered with alternatives to the BlackBerry, as well as lingering doubts about the impact of the global economic slowdown on both consumer and corporate spending

Earlier this month Apple Inc , a major rival in the consumer market, said it would cut the price of older models of its popular iPhone. Palm , a weaker competitor that could be gaining traction, recently launched its well-received Pre handset.

While some investors may not be so sure, RIM's outlook is still robust, said independent technology analyst Carmi Levy. It shows the Waterloo, Ontario-based company is still confident of its ability to keep pace with the competition, he said.

"They see it as a threat," he said of RIM's attitude toward rivals' new handsets and their aggressive prices. "They just don't see it as highly likely that it's really going to take them down significantly."

RIM earnings rose to $643.03 million, or $1.12 a share, in the three months ended May 30, from $482.5 million, or 84 cents, a year earlier.

Adjusted income in the quarter was 98 cents a share.

Analysts on average had expected RIM to earn 92 cents a share before one-time items, on revenue of about $3.4 billion, according to Reuters Estimates.

Revenue jumped to $3.42 billion from $2.24 billion as the smartphone maker added another 3.8 million new subscribers, pushing its total to almost 29 million.

For the second quarter ending August 29, RIM said it expects revenue of between $3.45 billion and $3.7 billion, and earnings per share of between 94 cents and $1.03.

Canaccord Adams analyst Peter Misek said the results marked "a solid quarter," but RIM's outlook may fall short of what some were forecasting.

"Expectations going into this were really, really high so I think there's going to be a little bit of disappointment with the guidance," he said.

RIM said it expects to add between 3.8 million and 4.1 million subscribers in the second quarter. Chief executive Jim Balsillie told analysts this is based on strong demand, new product launches and carrier promotions through the summer and into the fall.

As well, Balsillie said about 80 percent of new subscribers in the last quarter were "non-enterprise" -- or non-corporate -- signaling that RIM's push into the retail market continues to hold traction.

"These customers now represent over half of the total BlackBerry subscriber account base," Balsillie said.


RIM's fight for subscribers with Palm and Apple -- as well as Nokia and other handset makers -- is taking place against the backdrop of a sharp economic downturn. Companies and consumers alike have tightened their budgets.

Price is a powerful weapon for manufacturers to use against the competition in a bad economy. But at the same time, rolling out attractive new devices has become critical as feature-rich smartphones gain status as hot, must-have accessories.

"You're only as hot as your latest device. RIM recognizes that," Levy said. "Five years ago, you couldn't have said that about the company, but now they're probably one of the most aggressive companies in terms of bringing new hardware to market."

Earlier this week, RIM added another smartphone to its BlackBerry lineup as it aims to win market share among both executives and mainstream consumers.

The new model, known as the BlackBerry Tour, falls somewhere between the BlackBerry Curve, which has proved popular with consumers, and the BlackBerry Bold, which RIM has aimed at high-end corporate users.

RIM shares, which closed Thursday at $76.55 on Nasdaq, fell more than 5 percent to $72.70 in post-market trade. On the Toronto Stock Exchange, the shares finished 37 Canadian cents lower at C$86.79.

($1=$1.13 Canadian)

(Reporting by Wojtek Dabrowski; editing by Frank McGurty)