RIM lowers outlook with preliminary Q3 results

BlackBerry maker cites lower product shipments, economic woes

Research In Motion Ltd.'s preliminary results for its fiscal third quarter fell below its earlier forecast, with economic woes and product delays the prime culprits, the company said today.

RIM's preliminary third-quarter results call for revenue of $2.75 billion to $2.78 billion in the quarter, which ended Nov. 29. That's down from its earlier forecast of $2.95 billion to $3.10 billion. RIM attributed its change in outlook mostly to lower-than-expected product shipments, which it blamed on general economic problems and changes in product ship dates. The highly anticipated BlackBerry Storm touch-screen device, released Nov. 21 in the U.S., had been delayed more than once, according to news reports.

About one-third of the revenue shortfall was from depreciation of foreign currencies relative to the U.S. dollar, RIM said.

The number of new subscriber accounts for BlackBerry devices, previously expected to be 2.9 million, now looks like 2.6 million, according to the company. RIM also lowered its expected gross margin, which it now sets at 45% to 46%, citing a change in the mix of products it sold as well as foreign-exchange effects. Altogether, the new figures add up to expectations that RIM's earnings per share will be below the previous forecast of 89 to 97 cents.

The economic downturn in the U.S. and elsewhere is shaping up to be bad news for the previously fast-growing mobile-phone industry. Research firm Gartner Inc. last week said cell-phone sales growth slowed to 6% in the third quarter ended Sept. 30, down from 16% a year earlier, and would fall as much as 4% in 2009. And on Tuesday, iSuppli Corp. estimated that total shipments would decline 5.6% next year. Both firms said sales in developed regions, especially of more expensive phones, would be hardest hit as subscribers waited longer to upgrade to a new phone.

The slowdown comes at a particularly painful time for makers of smart phones, as RIM, Sony Ericsson, Nokia, Google Android handset partners such as High Tech Computer, and other vendors roll out high-end devices to compete with the Apple iPhone. The iPhone came out last year and was refreshed with its 3G version in July, before the worst of the U.S. financial meltdown.

Despite the preliminary results falling below its earlier forecast, RIM noted that its third-quarter revenue still would be 65% higher than a year earlier. And once the BlackBerry Storm hit the market, with lines of people gathering outside some stores, it took off faster than any BlackBerry in history, according to RIM. Daily and weekly net subscriber additions for BlackBerry devices in the U.S. hit record levels after the touch-screen device went on sale Nov. 21, it said. Demand for the new handset has continued into the current quarter, and RIM is working with partners to meet demand, the company said.

RIM plans to release its full third-quarter results and fourth-quarter forecast on Dec. 18.

Copyright © 2008 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon