RIM lowers outlook with preliminary Q3 results

RIM's preliminary results for its fiscal third quarter fell below its earlier forecast, with economic woes and product delays the prime culprits.

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

The company's preliminary third-quarter results call for revenue of $US2.75 billion to $US2.78 billion in the quarter, which ended Nov. 29. That's down from its earlier forecast of $US2.95 billion to $US3.10 billion. RIM attributed its change in outlook mostly to lower-than-expected shipments of its existing products, which it blamed on general economic problems and changes in ship dates for its products. 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 seen as 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 45-46 per cent, citing a change in the mix of products it sold as well as foreign-exchange effects. All together, the new figures add up to expectations that RIM's earnings per share will be below the previous forecast of $US0.89 to $US0.97.

The economic downturn in the U.S. and elsewhere is shaping up to be bad news for the previously fast-growing mobile-phone industry. The Gartner research firm last week said cell-phone sales growth slowed to 6 per cent in the third quarter ended Sept. 30, down from 16 per cent a year earlier, and would fall as much as 4 per cent in 2009. And on Tuesday, iSuppli estimated total shipments would decline 5.6 per cent 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 smartphones, as RIM, Sony Ericsson, Nokia, Google Android handset partners such as HTC, 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 per cent higher than a year earlier. And once the BlackBerry Storm hit the market, with lines 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 will release its full third-quarter results and fourth-quarter forecast on Dec. 18.

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Stephen Lawson

IDG News Service
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