RIM chases consumers, profits dip

The BlackBerry maker plans to continue targeting the broad market rather than just business users

Sales were up but profits down, Research In Motion said on Thursday when it reported second-quarter earnings that were below analyst estimates.

But the BlackBerry maker said the quarter was a successful one because its efforts to move beyond enterprise users and sell more devices to consumers have been going well.

Revenue for the second quarter, ended Aug. 29, was US$3.53 billion, up 37 percent from $2.58 billion in the same period last year. But net income dropped to $475.6 million, or $0.83 per share, from $495.5 million and $0.86 per share a year earlier.

Analysts had expected RIM to report revenue of $3.62 billion and earnings per share of $0.87.

RIM said its efforts to reach more consumers have been successful. More than 80 percent of the new subscribers to its BlackBerry service were non-enterprise customers, said Jim Balsillie, RIM's co-CEO, during a conference call to discuss the results.

"As we head into the third quarter we look forward to gaining traction with BlackBerry services in new market segments to drive the next leg of growth for the company," Balsillie said. "We are teed up to go much more mainstream."

The company shipped 8.3 million devices and added 3.8 million subscribers during the quarter. RIM is slightly different from most other handset vendors in that it sells phones but also operates a service network for delivering e-mail to end-users.

BlackBerry users are downloading applications from the company's new application store at a solid rate, according to Balsillie. There have been millions of downloads of instant-messaging clients, music programs like the one from Slacker and other applications, he said.

"And they aren't used once or twice and discarded," Balsillie said.

RIM plans some upgrades for its app store in the coming months, including new billing options to make it easier to buy apps.

The BlackBerry should also get an improved browser now that RIM has acquired Torch. The browser will employ the Webkit software, which is also used in the iPhone, Nokia phones and Android phones, and is becoming the "industry standard for smartphones," Balsillie said.

RIM expects to ship between 9.2 million and 9.9 million phones in the third quarter and report earnings per share between $1.00 and $1.08.

The smartphone market is expanding rapidly and the benefits of establishing an early lead will pay off for many years, Balsillie said. It's critical to gain a foothold in the mainstream market, "or the world will pass you by and you're a niche player, and that's not what we're planning here," he said.

RIM said it has a total BlackBerry subscriber base of about 32 million. While that makes it a leader in the smartphone market, it is facing stiff competition. RIM has been selling BlackBerry devices for many years, while Apple has racked up about 26 million iPhone users since introducing the device in mid-2007. RIM also faces competition from Google's Android platform and the Palm Pre.

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Nancy Gohring

IDG News Service
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