RIM sees Storm leading to stronger results

Palm, meanwhile, struggles with 13% drop in mobile phone sales

Research In Motion Ltd. announced financial results that matched a warning it gave earlier this month, but executives said sales of the BlackBerry Storm touch-screen handset and other new products are brightening the company's future.

RIM's revenue in the third quarter, which ended Nov. 29, was $2.78 billion, up 66% from a year earlier, the company said Thursday. Net income was $396.3 million, or 69 cents per share, up from $370.5 million, or 65 cents per share, a year earlier. Adjusted earnings, excluding the effect of the Canadian dollar's depreciation on RIM's tax rate, were 83 cents per share.

The profit met analysts' expectations compiled by Thomson Financial, while revenue was slightly below the consensus estimate of $2.82 billion. But RIM had lowered its own forecast for the quarter on Dec. 3, and results were in line with that forecast.

The quarter was hurt by the economic downturn and also by delays in the release of the BlackBerry Storm. When the phone finally went on sale Nov. 21, customers lined up outside many Verizon stores, and net subscriber additions for BlackBerry devices hit record levels in the U.S. The device is also offered by Vodafone U.K. The Storm is expanding the market for RIM, with more than 70% of the new devices being sold to first-time BlackBerry users, the company said.

RIM is now struggling to keep up with demand for the Storm, though executives said on a conference call that supply problems should clear up in the coming weeks. Along with the Storm, the recently introduced BlackBerry Bold and BlackBerry Curve 8900 are also seeing strong sales, the company said.

Largely on the strength of those products, RIM forecast a big jump in revenue in the current quarter, to between $3.3 billion and $3.5 billion. A high percentage of those sales is already booked, executives said. The popularity of the new models will also drive up the average selling price of RIM's products to $370 from $337 in this quarter. Earnings per share in the current quarter should be between 83 cents and 91 cents, the company said.

RIM is well equipped to take advantage of a shift in the industry toward smart phones, executives said. Another smart phone maker, Palm Inc., is having less success with the trend. On Thursday, Palm reported revenue in its fiscal second quarter, which ended Nov. 30, of $191.6 million. That was down from $349.6 million a year earlier.

Palm sold 599,000 smart phones in the quarter, down 13% from a year earlier, and revenue from smart phones fell 39%. The company reported a net loss of $508.6 million, or $4.64 per share. Not counting a tax-related charge and other special items, Palm lost $80.2 million, or 73 cents per share. Analysts had estimated a loss of 38 cents per share on revenue of $214 million.

"We're working through an undeniably difficult period," Palm President and CEO Ed Colligan said in a statement. The company is now gearing up for the release of a new Linux-based operating system, code-named Nova, which reportedly may be unveiled at the International Consumer Electronics Show to be held next month in Las Vegas.

Copyright © 2008 IDG Communications, Inc.

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